[Weekly Market Outlook] KOSPI in 'Fog' Amid Recession and Tightening Concerns

KOSPI Fell About 0.6% Last Week
Next Week's Outlook 2300-2420 Range, Lacking Upward Momentum

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] This week (December 12-16), the KOSPI closed lower as the U.S. Federal Reserve (Fed) reaffirmed its strong commitment to tightening. With expectations for a year-end Santa rally fading, the KOSPI is predicted to remain in a box range without upward momentum next week.

According to the Korea Exchange on the 18th, the KOSPI fell 0.57%, closing at 2360.02 from an opening of 2373.58 on the 12th. There was only one day of gains during the five trading days, on the 14th. After the final Federal Open Market Committee (FOMC) meeting of the year, Fed Chair Jerome Powell stated that "tightening is not yet sufficient and rate cuts are not being considered," causing the KOSPI to drop to an intraday low of 2329.75 points on the 15th. Although the Fed adjusted the pace with a big step (a 50 basis point rate hike), it did not have a positive impact on the market.

Concerns over rate hikes led to significant declines in technology stocks among the top market cap shares on the KOSPI. NAVER and Kakao fell 6.23% and 5.72%, respectively, over the week. Major tech stocks KakaoBank (-7.14%) and KakaoPay (-5.68%) also declined. Semiconductor-related stocks Samsung Electronics (-0.67%) and SK Hynix (-2.12%) also decreased.

Worryingly, weak economic indicators are negatively affecting the market. After the FOMC, November industrial production fell 0.2% month-over-month, missing market expectations of a 0.1% increase, and November retail sales dropped 0.6% month-over-month, failing to meet the forecasted 0.1% decline. As the global economy worsens, foreign investor demand is also decreasing, with 96 million KRW worth of stocks sold just this month. NH Investment & Securities researcher Younghwan Kim said, "Before the FOMC, weak economic indicators were linked to expectations of a Fed pivot, but now the economic data is being accepted as is," adding, "Foreign funds are sensitive to the economy in the long term, and for strong foreign inflows, expectations of a global economic turnaround need to rise."

There is little momentum to drive the KOSPI higher next week. NH Investment & Securities forecasts the KOSPI range to be between 2300 and 2420. Downgrades of earnings estimates for major companies continue, and investor sentiment to secure safe assets is expected to strengthen. There is also limited momentum from China's reopening to boost the index, as COVID-19 cases are rising amid eased quarantine measures.

Concerns about the global economy are expected to grow. On the 22nd, South Korea's November Producer Price Index and the U.S. third-quarter GDP final figures are scheduled for release, followed by the U.S. November PCE Price Index on the 23rd and the December University of Michigan Consumer Sentiment Index on the 24th. NH Investment & Securities researcher Yeokyung Jung said, "Exports from December 1-20, U.S. personal income, and key durable goods indicators will highlight global economic concerns," adding, "Public transport union strikes, including the Cargo Solidarity Union, likely caused some damage to transportation and export performance, similar to the impact seen in June."

Meanwhile, a factor that could affect the semiconductor sector is the earnings announcement from U.S. semiconductor company Micron. Major global investment banks (IBs) have lowered earnings forecasts for Micron, reflecting deteriorating demand for semiconductors, which could impact Samsung Electronics and SK Hynix. Deutsche Bank downgraded its investment rating on Micron from buy to hold and lowered the target price from $60 to $55.

This content was produced with the assistance of AI translation services.