KOSPI Weighed Down by Interest Rate Fatigue: Key Indicators to Watch This Week [Market ING]

Weekly KOSPI Expected to Trade in the 6,200–7,300 Band
Focus Shifts to Upcoming U.S. Inflation Data

Last week, the KOSPI continued its downward trend for a third consecutive week, weighed down by interest rates. While a period of consolidation within a range-bound market is expected for now, the market is likely to focus on the upcoming U.S. inflation data scheduled for this week.

Yonhap News Agency

Last week, the KOSPI fell by 1.50%, and the KOSDAQ declined by 2.97%. Kwon Sunho, a researcher at Daishin Securities, explained, “Despite solid export and earnings momentum in both semiconductor and non-semiconductor sectors, the domestic stock market weakened as external uncertainties gained prominence. Since the resumption of military clashes between the United States and Iran, heightened tensions have led to simultaneous increases in international oil prices and government bond yields, while volatility in financial markets has also grown.”

With the influence of interest rates intensifying, the market is expected to remain highly sensitive to rate movements for the time being. Lee Jaewon, a researcher at Yuanta Securities, noted, “Last week’s market action reaffirmed that interest rates are the key issue for September. When the yield on the 10-year U.S. Treasury exceeded 4.8% on the 2nd, flows into risk assets and smart money wavered, but as John Williams, President of the Federal Reserve Bank of New York, and Fed Governor Christopher Waller both took cautious stances on a September rate hike, yields fell, and both foreign investors and rate-sensitive growth stocks responded immediately.”

Kim Jongmin, a researcher at Samsung Securities, commented, “Stock market fatigue is mounting in the absence of upward momentum. Persistent upward pressure on U.S. long-term bond yields and ongoing geopolitical noise are weighing on global investor sentiment. Although the index lacks a clear direction during the current lull in major events, this phase should be viewed as a sideways movement absorbing peak fatigue, rather than a break in the uptrend.”

The period of market consolidation is expected to continue for some time. Kim Daejun, a researcher at Korea Investment & Securities, said, “After a sharp decline in July and a recovery in August, the KOSPI has now established a floor against further downside, but it will still take time for a trend reversal. The KOSPI’s 12-month forward price-to-earnings ratio (PER) as of the 2nd remains low at 5.2 times, but macroeconomic uncertainty and the lack of earnings momentum could limit further gains. For now, it is highly likely that the market will continue to take a breather within a limited range.”

In particular, after last week’s employment data came in better than expected, the market is expected to concentrate on the U.S. inflation data due this week. According to the U.S. Department of Labor’s employment report, released on the 4th (local time), non-farm payrolls in the U.S. increased by 162,000 last month, substantially surpassing market expectations. Na Jung-hwan, a researcher at NH Investment & Securities, said, “The Federal Reserve Bank of Cleveland forecasts the August Consumer Price Index (CPI) will rise 3.38% year-over-year, similar to July (3.4%), while also expecting core CPI to slow to 2.38% in August and 2.32% in September, down from 2.5% in July. Since real economy indicators are likely to support a Fed ‘pause,’ it is premature to base investment strategies on a possible rate hike at the September FOMC meeting before the August CPI is published.” NH Investment & Securities projects the KOSPI to trade within the 6,200 to 7,300 band this week.

This week’s key events include China’s August export data on the 8th, and on the 9th, China’s August CPI and Producer Price Index (PPI) will be released. On the 10th, the U.S. August PPI will be announced and the September European Central Bank (ECB) monetary policy decision meeting is scheduled. On the 11th, Korea’s export data for September 1–10, the U.S. August CPI, and the University of Michigan’s September consumer sentiment index will be published.

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