[Good Morning Stock Market] KOSPI Faces Foreign Investor Supply Pressure Amid High Exchange Rates... Expected to Start Down Around 0.3%

On the 17th (local time), the three major indices of the U.S. New York stock market closed slightly higher amid concerns over tightening monetary policy while monitoring corporate earnings announcements. During the session, the market rose supported by individual corporate earnings reports such as Charles Schwab (3.94%), but turned lower due to selling pressure caused by a strong dollar and a sharp rise in Treasury yields. However, the late-session strength in major financial stocks helped the market close higher. Accordingly, the Dow Jones Industrial Average rose 0.30% (100.71 points) to close at 33,987.18, the Standard & Poor's (S&P) 500 index gained 0.33% (13.68 points) to finish at 4,151.32, and the tech-heavy Nasdaq index increased 0.28% (34.26 points) to close at 12,157.72.

Alphabet (-2.66%) declined following media reports that Samsung Electronics is considering switching its smartphone search engine from Google to Microsoft's (0.93%) Bing. Apple (0.01%) rose slightly after initially gaining on news that its first-quarter sales in India increased by about 50% year-over-year, though it digested some selling pressure. HP (3.72%) showed strength after JP Morgan upgraded its investment rating amid a positive outlook for the PC industry in the second half of the year, and Inphase Energy (7.67%) surged after Piper Sandler raised its investment rating from neutral to overweight, factoring in a 40% sales growth this year.

Considering the U.S. stock market’s sector differentiation with fluctuations depending on individual corporate developments, it is expected that the Korean stock market will also continue to experience a stock-specific market. The heightened expectations for the earnings season in the U.S. market and the ongoing rebound buying are anticipated to have a positive impact. In particular, the improvement in U.S. economic indicators and the reduced risk of a hard landing are favorable for the Korean market, which is highly dependent on exports. However, the sharp rise in the won-dollar exchange rate and the continued weakness of the Korean won could negatively affect foreign investor flows, posing a downside risk.

[Image source=Reuters Yonhap News]

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The Korean stock market is expected to continue a stock-specific market after starting down 0.3%.

Yesterday, the Korean market initially declined due to the U.S. market’s weakness amid rising expected inflation and recession concerns but reversed to close higher, supported by strength in individual sectors such as secondary batteries. Notably, although foreign investors sold amid recession fears during the session, they bought nearly 250 billion KRW mainly in the electric and electronics sectors, significantly reducing net selling, which is a positive factor in terms of supply and demand. As a result, the KOSPI rose 0.17%, and the KOSDAQ increased 0.63% at the close.

Given the U.S. market’s sector differentiation with fluctuations depending on individual corporate developments, a stock-specific market is expected to unfold in the Korean market as well. The continued rebound buying driven by high expectations for the earnings season in the U.S. market is also expected to positively influence the Korean market. Especially considering the improvement in U.S. economic indicators and the reduced risk of a hard landing, which is positive for the export-dependent Korean economy, the stock market is expected to remain resilient.

However, despite improvements in economic indicators, some detailed components remain less optimistic, indicating that the U.S. economic slowdown continues, which is a concern. In particular, the sharp rise in the won-dollar exchange rate and the ongoing weakness of the Korean won could negatively impact foreign investor flows, which is also a burden. Although foreign investors continue net buying mainly in the electric and electronics sectors, this is largely concentrated in Samsung Electronics, which is a limitation. Ultimately, individual investors and foreign investors are focused on a few stocks, and the overall market is undergoing a selling absorption process. Therefore, the Korean market is expected to start down 0.3% and continue a stock-specific market.

[Image source=Yonhap News]

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Yesterday, the domestic market closed higher, supported by strong performance in secondary battery stocks, despite the U.S. market’s weakness last Friday and a sharp rise in the won-dollar exchange rate, mainly driven by individual investor flows.

Today, despite the U.S. market’s strength due to expectations of a solid earnings season, the domestic market is expected to experience similar intraday high price volatility, influenced by concentrated flows in specific sectors such as secondary batteries. Additionally, the won-dollar exchange rate rose more than 12 won yesterday due to importers’ payment demand and foreign investors’ dividend repatriation demand, negatively affecting foreign investor flows. Attention should be paid to the exchange rate trend, which is expected to start up 4 to 5 won today.

During the session, the market is expected to be influenced by China’s March real economy indicators such as retail sales and industrial production. Typically, steel stocks tend to rise when Chinese economic indicators improve and the yuan strengthens. However, yesterday, POSCO Group stocks including POSCO DX (30%), POSCO Future M (12.3%), and POSCO Holdings (1.8%) surged together, supported by the secondary battery theme. Therefore, the impact of China’s economic data on these group stocks’ price movements will be a key point to watch during the session.

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