[Market ING] KOSPI on a Rollercoaster, All Eyes on the FOMC

Weekly KOSPI Expected Range: 7,200 to 8,000

The rollercoaster market continues. Last week, the KOSPI index fluctuated between the 7,400 and 8,100 levels, experiencing significant volatility. This week, the upcoming June Federal Open Market Committee (FOMC) meeting in the United States could serve as another source of volatility. Experts predict that after digesting the FOMC, the market may be able to resume its upward trend.

Yonhap News

Last week, the KOSPI fell by 0.45%, while the KOSDAQ dropped by 2.65%. Although the weekly declines may not seem large, the KOSPI exhibited severe volatility, with a difference of over 14% between last week’s low and high points. On June 8, the index plunged by more than 8%, only to rebound by over 8% on June 9, highlighting the dramatic swings. Kim Jongmin, a researcher at Samsung Securities, noted, “We have just passed a week of extreme volatility. From June 8 over five trading days, both sell and buy sidecars, as well as circuit breakers, were triggered, resulting in utter chaos. The essence of the recent sharp fluctuations in the Korean stock market lies in the extreme supply-demand imbalance. Ahead of the simultaneous expiration of futures and options on June 11, the futures market (the tail) became excessively inflated, distorting and shaking the spot market (the body).”

Market volatility is expected to continue for the time being. Kim also said, “Tactical volatility could expand again as the structural upward trend of the Korean stock market continues.”

Lim Jeongeun, a researcher at KB Securities, commented, “The KOSPI saw repeated surges and drops last week, ending up slightly lower on a weekly basis, while the KOSDAQ posted gains of over 2%. The European Central Bank (ECB) decided to raise rates for the first time since 2023, and with the June FOMC in the U.S. coming up this week, volatility in the stock market is likely to persist due to possible changes in the rate path.”

With volatility heightened, market attention is expected to focus on the upcoming June FOMC in the U.S. Na Junghwan, a researcher at NH Investment & Securities, stated, “June 18 marks the first FOMC press conference chaired by Federal Reserve Chair Kevin Warsh, so the market will be focused on his policy tone. There are concerns that recent rebounds in international oil prices could lead to inflation worries and thus more hawkish (tightening) remarks. However, since the trimmed mean Personal Consumption Expenditures (PCE) and core Consumer Price Index (CPI) figures that Warsh closely watches have not shown sharp increases, the likelihood of extremely hawkish comments is low.” He added, “Nevertheless, if a cautious tone emerges that does not rule out rate hikes, additional expansion in market volatility will be inevitable. Given that in the recent volatile market environment, funds have eventually flowed into sectors with strong earnings momentum, this could be used as an opportunity to buy semiconductor stocks.”

Lee Jaewon, a researcher at Yuanta Securities, said, “The FOMC will be key this week, with the dot plot and Chair Warsh’s remarks serving as main variables for volatility. Rather than making excessive spread bets, a focused strategy on sectors with strong earnings visibility and less supply-demand pressure, such as semiconductors, semiconductor materials and equipment, distribution, and financials, is advisable.”

Although the FOMC will serve as a source of volatility, some predict it will mark a turning point for the resumption of the upward trend. Lee Kyungmin, a researcher at Daishin Securities, said, “Debates over artificial intelligence (AI) profitability and employment surprises that have increased monetary policy uncertainty have fueled volatility in the KOSPI and global markets. After digesting last week’s inflation, derivatives supply-demand pressures, and global liquidity constraints, we believe the market has undergone price and time corrections. While additional swings are possible depending on this week’s June FOMC results, we expect this to serve as a turning point for the resumption of the upward trend.”

Na also stated, “Once the market confirms the Fed’s policy stance, the direction will become clearer. If major tech companies report solid second-quarter results, the AI infrastructure investment strategy (HALO)—which involves investing in semiconductors, power equipment, nuclear power, and energy storage systems (ESS)—could once again prove effective.” NH Investment & Securities projected the KOSPI’s expected band for this week to be between 7,200 and 8,000.

Key events this week include the release of U.S. industrial production data for May on June 15, and on June 16, China will announce figures for May retail sales, industrial production, and fixed asset investment, while the Bank of Japan (BOJ) will hold its June monetary policy meeting. On June 17, U.S. May retail sales will be released. The U.S. June FOMC is scheduled for June 18, along with the Philadelphia Fed business outlook for June and the Conference Board Leading Economic Index for May.

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