[MarketING] KOSPI Takes a Breather Amid US Stock Market Holiday

KOSPI Starts Up for Second Day Then Turns Down
KOSDAQ Rises for Fourth Consecutive Day

The KOSPI initially rose for two consecutive days but then turned downward. With the U.S. stock market closed the previous day and major events scheduled for later in the week, a cautious sentiment has spread, creating a pause in the market. In the absence of clear momentum, the market is expected to focus on earnings as the second-quarter earnings season begins with Samsung Electronics' preliminary results announcement on the 7th.

KOSPI Turns Downward After Two Consecutive Days of Gains

As of 10:25 a.m. on the 5th, the KOSPI was at 2,584.52, down 8.79 points (0.34%) from the previous day. The KOSDAQ rose 3.37 points (0.38%) to 893.37.

On the 5th, the KOSPI index started the session with a firm gain, displayed in the dealing room of Hana Bank in Jung-gu, Seoul. Photo by Dongju Yoon doso7@

The KOSPI started higher but failed to maintain its upward momentum and turned downward. With the U.S. stock market closed and a growing cautious sentiment, the market lacks the strength to sustain gains. European markets also showed slight declines influenced by this sentiment. The Euro Stoxx 50 fell 0.16%, Germany's DAX index dropped 0.3%, and France's CAC 40 index declined 0.2%.

Sangyoung Seo, a researcher at Mirae Asset Securities, analyzed, "Although the European markets showed strength early in the session due to positive investor sentiment amid the U.S. market closure, they turned downward as concerns about economic slowdown due to weak German exports surfaced. However, with the upcoming release of the U.S. Federal Open Market Committee (FOMC) minutes for June, the market showed mild declines, reflecting sector differentiation based on individual stock issues rather than aggressive responses."

Germany's trade balance for May recorded 14.4 billion euros (approximately 20.3852 trillion KRW), falling short of the previously announced 16.5 billion euros and the expected 17.5 billion euros, indicating a continued economic slowdown.

Concerns that have weighed on the stock market remain unresolved, but there is no need to significantly widen the downside for the index. Jiyoung Han, a researcher at Kiwoom Securities, stated, "It is true that macroeconomic concerns such as the U.S. Federal Reserve's policy and recessions in major countries have not been fully resolved. While these could burden major stock markets in July, since no sudden adverse events or new negative factors have emerged, there is no need to significantly open the downside for the index."

Currently, the stock market is experiencing both upward factors such as the favorable seasonal factor of average monthly returns in July and expectations for second-quarter earnings, and downward factors including short-term overheating concerns and FOMC policy uncertainties. Han said, "In this situation, as major macro events such as U.S. employment data, Consumer Price Index (CPI), and the July FOMC are digested, short-term profit-taking pressure may increase. While market corrections may occur during this process, it is appropriate to assume a neutral price trend characterized by time correction rather than price correction as the base scenario." He added, "Overall, the index is expected to stagnate, but sector and theme differentiation will be highlighted as expectations for strong second-quarter earnings emerge."

Upcoming Earnings Season: Variables to Watch

With the index stagnating amid macro uncertainties, attention is growing on the upcoming second-quarter earnings season, as strong earnings would provide a clear additional momentum for further gains.

The domestic stock market will enter the earnings season starting with Samsung Electronics and LG Electronics announcing their results on the 7th. Donggil Noh, a researcher at Shinhan Investment Corp., said, "While the second-quarter earnings announcements themselves may not be a highly sensitive factor for stock prices, caution is warranted because upward revisions to second-quarter estimates have stopped. If second-quarter earnings fall significantly short of expectations, annual earnings could be revised downward, which may limit the index's upside."

The consensus estimates for KOSPI's second-quarter sales and operating profit are 646 trillion KRW and 38.7 trillion KRW, respectively, with minimal downward revisions from the peak. Noh explained, "Considering the second-quarter export growth rate and margins, the actual results are unlikely to fall significantly short of current estimates. The second-quarter earnings for the KOSPI will be more sensitive to sectors than to the overall index, given differences in export items and regions."

He emphasized the importance of focusing on sectors with upward earnings revisions during this earnings season. Noh said, "Changes in second-quarter operating profit have influenced the returns of KOSPI sectors over the past month. The sectors to watch are those with upward earnings revisions, including transportation, semiconductors, IT hardware, machinery, utilities, steel, automobiles, and securities."

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