[Good Morning Stock Market] KOSPI Expected to Start Higher... Absorbing Sell-off

US FOMC Minutes, BOK Monetary Policy Committee Results in Focus
Box Range Expected Until Employment and Inflation Data Confirmed

[Asia Economy Reporter Kwangho Lee] On the 20th, the domestic stock market is expected to start higher. However, this week is likely to continue in a box range amid the release of the February Federal Open Market Committee (FOMC) minutes, the February Bank of Korea Monetary Policy Committee (MPC) results, and major countries' economic indicators.

Earlier, on the 17th, the domestic stock market opened lower as Federal Reserve officials mentioned a 50bp (bp=0.01%) rate hike, following inflation pressures that expanded with the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) exceeding expectations.

Meanwhile, the U.S. stock market fell early in the session due to rising Treasury yields and a strong dollar, leading to selling mainly in tech stocks. However, it narrowed losses or turned positive later in the session as yields reversed downward, which can be seen as positive for the domestic market.

[Image source=Yonhap News]

However, the semiconductor sector, which had a significant rise since the beginning of the year, showed weakness with the Philadelphia Semiconductor Index falling 1.62%, posing a burden. Concerns about a recession persist as the U.S. leading economic index slows, which also dampens investor sentiment. Considering this, the Korean stock market is expected to start slightly higher but will likely undergo a process of digesting sell-offs amid foreign investor supply concerns.

Sangyoung Seo, a researcher at Mirae Asset Securities, said, “For the time being, the market will move sideways within a box range, digesting profit-taking sell-offs,” adding, “It is more likely to be a box market where both upside and downside are limited rather than turning into a clear downtrend as in the past.”

This week, the domestic stock market is expected to digest major economic indicators such as the February U.S. FOMC minutes, manufacturing Purchasing Managers' Indexes (PMI) from the U.S. and Eurozone, U.S. Personal Consumption Expenditures (PCE), Korean exports, the February MPC results, subsequent changes in the won-dollar exchange rate, and earnings events from U.S. companies like Walmart, Nvidia, and Berkshire. The box range trend is expected to keep the weekly KOSPI index moving between 2400 and 2500 points.

If the February FOMC minutes scheduled for this week contain market-friendly clues about the March FOMC, a short-term stock price overshoot may be possible. However, as inferred from the indicators after the February FOMC and the remarks of Fed officials, it is expected to contain hawkish content.

Jiyoung Han, a researcher at Kiwoom Securities, explained, “Unlike January, the stock market's upside is constrained by rising interest rates, a strong dollar, and fading expectations of a Fed rate cut within the year,” adding, “The fact that the KOSPI has not surpassed the mid-to-long-term trend line of 2500 points is in the same context.” Han also said, “It would be appropriate to prepare for the possibility that the current market sentiment will continue until employment and inflation data, which will be obtained once more before the March FOMC, are confirmed.”

Regarding the recent weakening foreign net buying strength, the MPC results from the Bank of Korea are seen as an event the stock market should watch during the week. Since the beginning of the year, the background of foreign net buying has been largely ▲ capital inflows into emerging markets (EM) ▲ low foreign investment proportion in the Korean stock market ▲ and expectations of foreign exchange gains.

Meanwhile, the New York stock market will be closed on the 20th (local time) for Presidents' Day. Therefore, this week's trading days are four, shorter than usual.

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