[MarketING] KOSPI Returns to 2620 Level Amid Eased Tightening Concerns

KOSPI Rebounds in One Day... Recovers 2620 Level Early Session
US Employment Data Weakness Eases Tightening Concerns Slightly

The KOSPI turned to an upward trend after a day. This is interpreted as a result of somewhat eased concerns about tightening, which acted as a downward factor in the stock market the previous day. Although a wait-and-see stance is expected to deepen ahead of next week's U.S. inflation data release and the June Federal Open Market Committee (FOMC) meeting, opinions suggest that foreign investors' sentiment has not been damaged.

KOSPI turns positive after a day... recovers to 2620 level in early trading

As of 10:20 a.m. on the 9th, the KOSPI was at 2,623.14, up 12.29 points (0.47%) from the previous day. The KOSDAQ rose 9.14 points (1.04%) to 885.27.

[Image source=Yonhap News]

This strength appears to be influenced by the U.S. stock market rising as concerns about tightening eased due to weak employment data the previous day. On the 8th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 0.5%, the S&P 500 increased 0.62%, and the Nasdaq rose 1.02% compared to the previous day.

Sangyoung Seo, a researcher at Mirae Asset Securities, said, "The U.S. stock market rose mainly in large tech stocks and semiconductor sectors, which had been weak the previous day, as Treasury yields fell due to weak employment data." He added, "Although tech stocks fell due to FOMC uncertainty triggered by Canada's rate hike the previous day, they rebounded as employment data was weak."

The number of new U.S. unemployment claims recorded 261,000, significantly exceeding the previous week's 233,000 and the forecast of 235,000, showing a weak performance. This is the highest figure since October 2021. The 4-week average also increased from 229,750 to 237,250. Researcher Seo analyzed, "Although this is much lower than the level of over 370,000 seen in past recessions, it is estimated to have had a positive impact on the stock market, especially tech stocks, as it indicates a labor market easing that the U.S. Federal Reserve (Fed) wants to see."

The Eurozone's finalized first-quarter gross domestic product (GDP) recorded -0.1% (preliminary +0.1%, Q4 -0.1%), entering a technical recession with two consecutive quarters of negative growth. This also acted as a factor easing the European Central Bank's (ECB) justification for further tightening.

Jiyoung Han, a researcher at Kiwoom Securities, explained, "Although inflation is still high and unemployment is low, so the ECB will not change its stance at the June meeting immediately, concerns about additional Fed tightening, which had emerged after rate hikes by the central banks of Australia and Canada, have eased." She added, "As a result, market interest rates fell, and following the Dow and Nasdaq, the S&P 500 also rose 20% from the October 2022 low, entering a bull market." She continued, "Today’s market will see some wait-and-see sentiment ahead of next week’s U.S. May Consumer Price Index (CPI) and FOMC, but the entry into a U.S. stock bull market and strength in AI-related stocks such as Nvidia and AMD will act as positive factors, leading to strength centered on the semiconductor sector."

Foreigners expected to maintain 'Buy Korea' stance

Recently, as semiconductor stock prices slowed due to foreign investors' profit-taking, attention is focused on whether there will be changes in foreign investors' movements.

Yujun Choi, a researcher at Shinhan Investment Corp., said, "This week, foreigners have net sold 450 billion KRW worth of KOSPI stocks, evenly selling large-cap stocks including semiconductors." He added, "Although the futures and options expiration had an impact, the KOSPI has risen to the 2600 level, and investors are waiting for additional upward momentum. The change in foreign investors' supply and demand after monetary policy events is also a point to watch."

There is an opinion that foreign investors' sentiment has not yet been damaged. Researcher Han explained, "Although AI-related stocks in the U.S. stock market have recently undergone corrections and foreigners have net sold for three consecutive days in the domestic market, they net bought over 700 billion KRW in futures the previous day, and buying pressure flowed in mainly on SK Hynix and semiconductor equipment stocks in the late session, pushing the index above 2600 again. Considering this, despite the macroeconomic environment with uncertainties remaining until the July FOMC, foreign investors' sentiment is judged to be not yet damaged."

Although Korea's inclusion in the Morgan Stanley Capital International (MSCI) developed market index watchlist failed, this is also expected not to damage foreign investors' buying stance. According to the financial investment industry, MSCI announced the '2023 Market Accessibility Review Results' on the day and classified Korea as an emerging market (EM) as in the previous year. Researcher Han analyzed, "The risk announcement for the developed market watchlist is scheduled for the 22nd, and even if Korea fails to be included, foreign investors positively evaluate changes such as further opening of the foreign exchange market, improvement of dividend procedures, improved accessibility for foreign investors, and the share buyback system improvement to be implemented in the second half of the year. As policy effects appear with a time lag, inclusion in the developed market index may occur later, so foreign investors' 'Buy Korea' stance will not be damaged."

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