[Market ING] KOSPI Eyes Interest Rate Direction, Attempts to Settle Above 7,000 Points

Weekly KOSPI Projected Range: 6,200 to 7,200 Points

Last week, the KOSPI continued its five-day winning streak, recovering the 7,000-point level during trading sessions. As the earnings season draws to a close, the KOSPI is expected to focus on the direction of interest rates and attempt to settle above the 7,000-point mark.

Yonhap News Agency

Last week, the KOSPI rose by 11.49% and the KOSDAQ by 8.24%, respectively. The KOSPI returned to gains for the first time in eight weeks, with all trading days closing in the green last week. Jaewon Lee, a researcher at Yuanta Securities, explained, "Both the KOSPI and the KOSDAQ rose for five consecutive sessions last week, buoyed by easing concerns over U.S. inflation and interest rates, as well as strong performance in the memory sector." He added, "The KOSDAQ, however, showed relatively limited movement due to profit-taking following its recent sharp rebound and weakness in some large-cap biotechnology stocks."

The semiconductor sector regained its leadership, driving the stock market's gains. Kyungmin Lee, a researcher at Daishin Securities, noted, "As momentum for semiconductor exports and price increases became evident, the KOSPI regained its market leadership based on valuation and price appeal." He also analyzed, "Non-semiconductor sectors also experienced rotational buying, thanks to improvements in exports, earnings momentum, supply-demand conditions, and the stabilization of bond yields."

Foreign investors also returned as buyers, adding momentum to the index's rise. Last week, foreigners recorded net purchases of KRW 8.0485 trillion in the KOSPI market. Junghwan Na, a researcher at NH Investment & Securities, explained, "The KOSPI rose due to net buying by both foreign investors and institutions. Following confirmation of the U.S. Consumer Price Index (CPI) for July, expectations for a rate cut by the Federal Open Market Committee (FOMC) in September increased, prompting some foreign investors to shift their exposure from derivatives to cash equities." He added, "Additionally, some of the buying is estimated to be delta hedging by dealers responding to investors' call option purchases." NH Investment & Securities suggested an expected KOSPI band between 6,200 and 7,200 for this week.

Researcher Jaewon Lee emphasized, "For the KOSPI's upward trend to continue, it is crucial for foreign investors to return to consistent net buying. With individuals showing weaker buying power—due to the recent decrease in customer deposits and a renewed expansion in margin loans—the buying trend seen in the first half of the year is unlikely to continue. On strong rally days, foreigners are net buyers and individuals are net sellers, and the opposite occurs on down days. The easing of rate burdens through price stabilization and the recent decline in the KOSPI 200 Volatility Index (VKOSPI) provide a favorable environment for foreign investors to return."

Although market sentiment remains positive, interest rates are highlighted as a variable to watch. Jongmin Kim, a researcher at Samsung Securities, noted, "Many of the concerns weighing on the market have now been largely resolved. Geopolitical tensions have eased, tightening vigilance has declined significantly, and strong fundamentals in the artificial intelligence (AI) industry are once again pushing the market higher." He added, "I believe that the market has exited the tunnel of uncertainty and is settling into normalization." He further cautioned, "However, the persistent rigidity of long-term rates remains a lingering issue. As long as there is no extreme rate shock in the current situation, positive factors are likely to dominate the market and lead to a relief rally."

Jungeun Lim, a researcher at KB Securities, commented, "With both domestic and international earnings seasons mostly concluded, the market will focus this week on the minutes of the upcoming Federal Open Market Committee (FOMC) meeting to gauge the future direction of interest rates."

Major events scheduled this week include Korea's export data for August 1-20, the U.S. New York Federal Reserve Manufacturing Index for August, and China's July reports on retail sales, industrial production, and fixed asset investment, all set for August 17. On August 18, the U.S. will announce its industrial production data for July. On August 20, the U.S. will release the minutes of the July FOMC meeting and the Conference Board Leading Economic Index for July. On August 21, the U.S. S&P Global Manufacturing and Services Purchasing Managers’ Indexes (PMIs) for August will be released.

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