[Good Morning Stock Market] Will the 'Powell's Words' Pull Down the Korean Stock Market Too?

[Asia Economy Reporter Ji Yeon-jin] On the 22nd (local time), the US stock market saw the Dow Jones Industrial Average reach an all-time high, led by gains in energy and financial stocks. However, concerns over declining advertising revenue for tech companies and Federal Reserve Chairman Jerome Powell's indication of a potential economic slowdown caused major technology stocks on the Nasdaq to plunge, closing lower. The domestic stock market is also expected to open lower due to Powell's remarks. Experts advise focusing on the Q3 earnings announcements, as macro issues such as economic slowdown concerns may continue to influence the market, potentially leading to a stock-specific market.

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◆ Sangyoung Seo, Researcher at Mirae Asset Securities = On the last trading day, the US stock market closed mixed as concerns about supply chain issues and prolonged high inflation highlighted by Fed Chairman Powell brought economic slowdown issues to the forefront, leading to some intraday selling. Therefore, the Korean stock market is expected to open slightly lower.

The MSCI Korea Index ETF rose 0.17%, the MSCI Emerging Markets ETF fell 0.21%, and the offshore non-deliverable forward (NDF) 1-month USD/KRW rate was 1,178.31 won. Reflecting this, the USD/KRW exchange rate is expected to open about 1 won higher. The Korean stock market is expected to start lower due to selling pressure, but the direction of the index will likely be determined by individual corporate earnings announcements such as those from LG Chem and POSCO.

◆ Daejun Kim, Researcher at Korea Investment & Securities = Last week, the KOSPI hovered around the 3,000 level. While it was fortunate that there was no further decline, the week was somewhat disappointing due to weak rebound momentum. The macro environment influencing market sentiment continues to show uncertainty. Chairman Powell's comments on inflation also reflect this situation.

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Now is the time to look for stock price catalysts beyond macro variables. The Q3 earnings season has arrived. It is well established that stock prices move according to earnings. Looking at the current earnings trend of the KOSPI, the combined net profit for Q3 is estimated at 45.4 trillion won, a 43.5% increase compared to the same period last year. The growth rate is lower than Q2 due to the disappearance of the base effect. However, the increase in profits can be viewed positively. That said, figures may vary by industry.

◆ Kyungmin Lee, Researcher at Daishin Securities = Semiconductors, which have been at the center of the KOSPI's relative underperformance until last week, hold the key to the KOSPI's technical rebound phase going forward. The reason for the KOSPI and Taiwan stock market's underperformance compared to global markets like the US is uncertainty about next year's industry conditions and earnings, centered on semiconductors. However, the Q4 operating profit outlook for the KOSPI remains robust, which is why a technical rebound phase could unfold.

However, the Q4 operating profit forecast for the semiconductor sector has been revised downward by 4.45% over the past month. The semiconductor sector's operating profit forecast for next year dropped from 81.4 trillion won at the end of July to 70.7 trillion won, and there is significant uncertainty about whether it can maintain the 70 trillion won level. Therefore, attention is focused on this week's conference calls of Samsung Electronics and SK Hynix. This is the biggest turning point that will determine the semiconductor sector's rebound and the KOSPI's short-term rebound.

◆ Seungjin Shin, Researcher at Samsung Securities = The KOSPI around 3,000 and KOSDAQ around 1,000 continue to experience a sluggish market trend. This is because an unclear macro environment and doubts about the sustainability of future earnings permeate the market. Thematic markets unrelated to macro factors are likely to continue for the time being.

This week, attention should be paid to the reopening theme that has been emphasized. Since plans for phased daily recovery will be announced starting in November, the media and content sectors could benefit. Also, it is advisable to approach eco-friendly stocks among cell manufacturers and renewable energy companies such as solar and hydrogen that do not carry high valuation burdens. Rising raw material prices and transportation costs are adding pressure to inflation, which in turn is driving global interest rates upward. In the inflationary phase, sectors like steel and banks that can pass on costs and prices are beneficiaries.

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