[Good Morning Market] KOSPI Pressured by Tightening and Recession Fears... Expected to Start Lower

US New York Stock Market Closes Lower... Concerns Rise Over Weak Auto and Semiconductor Demand
Next Week's Korean Industrial, Retail, and Export Data Release... Caution Advised for Increased Market Volatility

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] As concerns over aggressive tightening and fears of an economic recession resurfaced, the U.S. stock market in New York plunged across the board. This was due to worries that the Federal Reserve's (Fed) determination to raise interest rates could strengthen after the U.S. third-quarter Gross Domestic Product (GDP) was confirmed to be higher than the preliminary estimate. Additionally, with analyses suggesting that the intensity of next year's recession could worsen due to stringent tightening measures, the Nasdaq Composite (-2.18%), Dow Jones Industrial Average (-1.05%), and S&P 500 (-1.45%) all showed sharp declines.

Seosangyoung, Researcher at Mirae Asset Securities: “Declines in Tesla and Semiconductor Stocks Negative for Domestic Market”

The decline in the U.S. stock market due to tightening and recession concerns is negative for the domestic market. In particular, the Philadelphia Semiconductor Index fell 4.2%, highlighting concerns over semiconductor companies' earnings next year, which is expected to increase downward pressure on the domestic market.

On the previous day in the Korean stock market, semiconductor companies such as Samsung Electronics (1.9%) and SK Hynix (1.54%) showed strength, buoyed by remarks that earnings improvements could begin in earnest from the second half of next year despite Micron's disappointing earnings announcement. The inflow of program buying by institutional investors ahead of year-end dividends also positively influenced stock prices.

However, the reaction from U.S. investors was different. Amid concerns about a recession, Micron's poor earnings report was interpreted negatively, with expectations that semiconductor demand will further decline. Accordingly, major semiconductor companies including Intel (-3.2%), Qualcomm (-3.41%), Lam Research (-8.6%), and Nvidia (-7%) all recorded significant drops.

Tesla’s announcement of discounts for Model 3 and Model Y buyers in the U.S. and Canada also negatively impacted the domestic market. This raised concerns over sluggish automobile sales, leading to declines in GM (-6.6%), Ford (-3.99%), Xiaopeng (-4.16%), and Nio (-2.76%).

Considering these factors, the KOSPI is expected to start the session with a decline of around 1%. However, since recession issues have already influenced the domestic market, it is unlikely to cause a major shock. If program buying by institutional investors flows in ahead of the year-end ex-dividend date, the decline could narrow.

Yumi Kim, Researcher at Kiwoom Securities: “Concerns Over the Fundamentals of the Korean Market Expand... Preference for Safe Assets Increases”

Negative views on the fundamentals of the Korean stock market are expected to grow. Next week, key monthly indicators such as November domestic industrial production, retail sales, December CPI, and December exports and imports will be released, and they are generally expected to be weak.

For November domestic industrial production, the year-on-year decline is expected to widen. The market currently anticipates a decrease of about 4.9%, larger than last month’s (-1.1%). Korea’s export growth rate is estimated to decrease by 12%, continuing the double-digit decline following the previous month’s (-14%).

[Image source=Yonhap News]

The China Manufacturing Purchasing Managers’ Index (PMI) to be announced next week is expected to be 48.3, slightly improving from the previous month’s (48) but still below the baseline (50). Since the U.S. ISM Manufacturing Index also fell below the baseline, negative views on the global economy are expected to deepen.

As a downturn in the semiconductor industry, a major export item, is anticipated, negative export growth is inevitable for the time being. Although uncertainties regarding Fed tightening remain, Korea’s economy has so far been relatively less highlighted. However, domestic and external demand weakness is ongoing, and this trend is expected to become more apparent next year. Attention should be paid to the possibility of increased financial market volatility and a stronger preference for safe assets due to economic contraction.

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