[Weekly Market Outlook] Increased Volatility Due to Concentration... Greater Impact of Earnings

Last Week: KOSPI Down 0.06%, KOSDAQ Down 2.23%
Expected KOSPI Range This Week: 2530~2670 Points

The stock market this week (July 31 to August 4) is expected to see increased influence from earnings amid heightened volatility caused by concentration effects.

According to the Korea Exchange on the 30th, last week the KOSPI fell by 0.06%, while the KOSDAQ dropped by 2.23%. The decline in KOSDAQ was relatively larger due to fluctuations in secondary battery stocks.

[Image source=Yonhap News]

Last week's market trend clearly showed high volatility caused by concentration effects. This week, as the concentration effect eases and supply-demand normalizes, high volatility is expected to continue. Choi Yoo-jun, a researcher at Shinhan Investment Corp., said, "The supply-demand concentration centered on secondary battery stocks continued, showing high volatility," adding, "Although the concentration effect is easing and the market is finding balance, volatility may increase during the supply-demand normalization process." In particular, volatility in the KOSDAQ is expected to rise. Researcher Choi explained, "Profit-taking by individual investors, who have been the main force in supply-demand, may be concentrated, and pressure from margin trading liquidations could add to this, making it a significant variable affecting the KOSDAQ."

Given the heightened market volatility, the influence of earnings is expected to grow. Kim Young-hwan, a researcher at NH Investment & Securities, said, "The factors driving the market up this week will be the retreat of recession forecasts and solid Q2 earnings, while the downside risks include concerns over weakened individual investor sentiment due to increased stock volatility," adding, "This week will remain a period of high attention to the Q2 earnings season." NH Investment & Securities has set the expected KOSPI range for this week at 2530 to 2670 points.

Researcher Choi said, "After the earnings announcements of large corporations, earnings reports from software, finance, consumer goods, and mid-sized companies will follow," adding, "The influence of earnings is becoming greater than monetary policy variables."

This week, Purchasing Managers' Indexes (PMIs) from major countries are scheduled to be released. On the 31st, China's July National Bureau of Statistics PMI is expected, followed by China's July Caixin Manufacturing PMI and the U.S. July Institute for Supply Management (ISM) Manufacturing PMI on August 1. On the 3rd, China's Caixin Services PMI and the U.S. July ISM Services PMI will be announced. Researcher Choi said, "China's manufacturing sector has been in contraction for three consecutive months through last month, and July is also expected to be weak. On July 24, the Chinese Central Political Bureau meeting mentioned the need to revitalize capital markets, stimulate consumption, ease real estate demand regulations, and foster new industries," adding, "It is necessary to confirm specific detailed measures later, and it will be important to observe whether the weak indicators act as 'bad is good' factors." He continued, "The preliminary U.S. July manufacturing PMI is in contraction territory but was the highest in three months; if this improvement trend is confirmed again, it will be positive for the domestic stock market."

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