[Market ING]Will the KOSPI Rebound? Earnings and Inflation Indicators in Focus

Weekly KOSPI Expected Range: 6,900 to 7,900 Points

As market volatility continues, the KOSPI staged a rebound late last week, raising expectations for a recovery in investor sentiment. This week, the market is expected to be influenced by the release of second-quarter earnings and inflation indicators for this year. As the recent downward trend has eased valuation pressures, there are now forecasts that the market will become more sensitive to positive developments rather than negative ones.

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Last week, the KOSPI declined by 7.57%, and the KOSDAQ fell by 3.57%. The KOSPI continued its weak trend, dropping from the 8,000-point range early in the week to the 7,000s during the week, but finished the week at the 7,400 level after two consecutive days of gains at the end. Jeongeun Lim, a researcher at KB Securities, said, "Last week, the KOSPI and KOSDAQ returns were in the -7% and -3% ranges, respectively, but rebounded in the latter part of the week as investor sentiment recovered," adding, "This week, the U.S. financial sector kicks off its second-quarter earnings season, and the schedules for the June Consumer Price Index (CPI) and Producer Price Index (PPI) are set. Whether the recently cooled risk appetite will persist will be determined by the outcomes of the earnings season and other indicators."

Kyungmin Lee, a researcher at Daishin Securities, said, "The KOSPI has retreated from the all-time high of 9,385.59 points (June peak) to the 7,400s," noting, "Concerns over a breakdown of the upward trend have intensified as the index has fallen below the key 40- and 50-day moving averages. This sharp decline was caused by a cycle of deteriorating investor sentiment and supply-demand shocks, triggered not by worsening earnings but by excessive concentration in semiconductors and the unwinding of leveraged investments."

There are forecasts that, as continued declines make the KOSPI more attractive in terms of valuation, the market will become more sensitive to positive rather than negative developments. Lee stated, "The KOSPI is currently at a historically undervalued stage in terms of valuation. As it has fallen below key support levels, it may take some time to reverse the trend, but even small positive news could lead to a sharp turnaround at these levels." He added, "A similar trend occurred from late March to early April: after the U.S.-Iran war, a surge in oil prices led to higher bond yields and a rise in the won-dollar exchange rate, raising concerns that the KOSPI could fall below the 5,000-point level. However, with expectations of an end to the war and a ceasefire, combined with robust semiconductor exports, the KOSPI rose sharply from its March 31 low of 5,052 points to 9,385 points on June 19."

The market is expected to recover after this correction. Jeonghwan Na, a researcher at NH Investment & Securities, commented, "The recent correction was more a reflection of concerns about slower earnings growth and capital expenditures (CAPEX) than a deterioration in fundamentals. The absolute level of earnings remains solid. It is difficult to justify a 20% decline from the KOSPI's peak based solely on a slowdown in earnings growth. The market has been in an oversold phase where unwinding of leveraged funds added selling pressure, but it is more akin to a phase of absorbing supply rather than a fundamental issue. After this outflow of funds due to price volatility unrelated to fundamentals is absorbed, a meaningful rebound is expected." NH Investment & Securities suggested a KOSPI range of 6,900 to 7,900 points for this week.

Giryang Park, a researcher at Samsung Securities, also said, "Although there may be volatility due to tangled supply and demand, we expect the Korean stock market to rebound strongly after this correction," adding, "Rather than being swayed by external noise, it is time to focus on profit growth driven by artificial intelligence (AI)."

This week's key events include the release of South Korea's export data for July 1-10 on the 13th, and the U.S. June CPI on the 14th. On the 15th, the U.S. June PPI, the July New York Federal Reserve Manufacturing Index, and China's June retail sales, industrial production, fixed asset investment, and second-quarter GDP will be announced. On the 16th, the U.S. June retail sales will be released, followed by the U.S. June industrial production and the July University of Michigan Consumer Sentiment Index on the 17th.

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