[Market ING] Interest Rates and Foreign Investors Now Key to KOSPI Rebound... Focus on Inflation Data

Weekly KOSPI Projected Range: 6,000–7,000

Last week, the KOSPI index experienced significant fluctuations throughout the week but ultimately closed the week at nearly the same level, marking little net change. For a sustained rebound in the KOSPI, factors such as interest rate stability and the return of foreign investors are necessary, so the market is expected to focus this week on the U.S. inflation indicators scheduled to be released.

Yonhap News Agency

Last week, the KOSPI dropped by 5.10% while the KOSDAQ soared by 10.98%. The KOSPI ended the week with a decline for the seventh consecutive week, but the KOSDAQ showed a contrasting trend by posting a sharp rise. Jaewon Lee, a researcher at Yuanta Securities, explained, "Volatility in the KOSPI heightened once again due to profit-taking and concerns about SanDisk's earnings, whereas the KOSDAQ continued a relatively stable rebound, helped by the return of individual investors and the lessening of concentration in large-cap semiconductors."

Analysts say a return to net buying by foreign investors is needed for the KOSPI to rebound. Researcher Lee noted, "A resumption of net buying by foreign investors is necessary for the KOSPI to stage a sustained rebound. As hyperscalers’ AI investments have entered a capital-intensive phase accompanied by corporate bond issuance and external borrowing, interest rate stabilization will be a key condition for continued investment and for determining semiconductor supply and demand."

Accordingly, the market is expected to focus on the U.S. inflation indicators to be released this week. Lee observed, "The direction of foreign investor flows will be influenced by the U.S. Consumer Price Index (CPI), Producer Price Index (PPI), and the extent to which geopolitical tensions between the U.S. and Iran subside. These factors will impact oil prices, long-term interest rates, and the won-dollar exchange rate."

Kyungmin Lee, a researcher at Daishin Securities, said, "This week’s U.S. inflation data will allow for a reassessment of the Federal Reserve’s interest rate hike prospects and the prevailing market consensus. Given that international oil prices rebounded during the renewed conflict and negotiations between the U.S. and Iran, the key will be whether energy-driven price pressures spread to core and service prices. Should inflationary pressures prove strong, the odds of further tightening rise, which could increase upward pressure on U.S. Treasury yields and the U.S. dollar. This calls for caution."

There is also the opinion that institutional changes, such as shareholder return policies, are required to increase foreign inflows. Jungwhan Na, a researcher at NH Investment & Securities, said, "At present, additional foreign inflows need institutional catalysts rather than earnings alone. The implementation of more concrete shareholder return policies or institutional reforms should take precedence, and a revision of inheritance and gift tax laws is a related variable." He continued, "The government’s anti-stock price suppression act targets just over 100 companies based on the lowest 25% of price-to-book ratios by sector, and avoidance is possible if companies exceed the threshold in just two of 13 quarters, raising questions about effectiveness. The ruling party has proposed an amendment to set the lower limit for fair value at 80% of net asset value for tax purposes. If adopted, this could raise expectations for the revaluation of low-PBR stocks and serve as a factor attracting foreign investment." NH Investment & Securities suggested a projected KOSPI range of 6,000 to 7,000 for this week.

Key events this week include Korea’s export data for August 1–10 on the 11th, and the U.S. July CPI announcement on the 12th. On the 13th, the U.S. PPI will be released. On the 14th, the U.S. July retail sales and the August University of Michigan Consumer Sentiment Index will be published.

Corporate earnings announcements will also continue. In the U.S., Rocket Lab will report on the 10th, followed by CoreWeave and Super Micro Computer on the 11th, and Applied Materials (AMAT) on the 13th. In Korea, major earnings announcements on the 11th include Shinsegae, CJ CheilJedang, and NC; on the 12th, Mirae Asset Securities, Meritz Financial Group, Wemade, Com2uS, and JYP Entertainment will release their results; and on the 13th, LG, Samsung Life, D'Alba Global, and Emart will report their second-quarter earnings.

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