Tariff Concerns Ease, New Government Boosts Stock Market... "This Year to Reach 3000 Points"

Expectations are rising that the KOSPI index will reach 3000 points in the second half of this year. In just four trading days, it jumped from 2500 to 2700 points, and concerns over trade conflicts that have been suppressing the stock market have somewhat eased. Additionally, the interest rate cut trend and the new government's policy effects are expected to act as upward momentum. However, the possibility of a surge in U.S. Treasury yields is considered a variable.

According to the financial investment industry on the 29th, major securities firms have set the expected upper limit of the KOSPI for the second half of this year at around 3000 points. The highest upper limit was suggested by Eugene Investment & Securities. Eugene Investment & Securities set the expected KOSPI band for the second half at 2550~3050 points. Following this, Hanwha Investment & Securities and NH Investment & Securities each predicted the KOSPI upper limit at 3000 points, while Korea Investment & Securities suggested 2400~2900 points, Shinhan Investment Corp. 2400~2850, and Hyundai Motor Securities 2360~2890 points.

The background for the rising stock market expectations includes the anticipation of easing U.S.-originated tariff risks. Although the KOSPI index gave up the 2300 points last month due to Trump-induced trade war concerns, it is expected that the tariff shock will ease as negotiations progress towards the second half. In particular, it is believed that as the midterm elections approach next year, related uncertainties will significantly decrease.

NH Investment & Securities researcher Kim Byung-yeon said, "In the second half, Trump is likely to repeat tariff impositions and renegotiations to strengthen trade restructuring," adding, "Nevertheless, even if tariffs are reimposed and renegotiations continue, in a situation where similar stimuli are repeated, the market is likely to react insensitively. The intensity of the financial market's reaction will gradually weaken."

Expectations for domestic demand stimulation due to changes in domestic politics are also supporting the KOSPI rise outlook. With the new government expected to launch through an early presidential election, it is anticipated that a strong domestic demand stimulus package will be pursued in the political arena.

Hyundai Motor Securities researcher Kim Jae-seung explained, "Currently, Korea's domestic market is in an extremely sluggish situation, and a strong domestic demand stimulus package is required from the new government," adding, "Both parties agree on the need for domestic demand stimulation."

The interest rate cut is also expected to act as a positive factor for the stock market. On this day, the Bank of Korea lowered the base rate from the previous 2.75% to 2.50%. The base rate recorded 2.50% for the first time in about 2 years and 7 months since October 2022. In particular, the Bank of Korea does not rule out the possibility of expanding the scope of future base rate cuts.

DS Investment & Securities researcher Yang Hae-jung pointed out, "Although tariffs are the dominant issue, like during the first Trump administration, the most important thing for the market is that interest rates are going down," adding, "If interest rates do not go down, valuation burdens increase, and burdens on corporate profits also increase, weakening the driving force for the stock market's rise."

However, the possibility of a surge in U.S. Treasury yields is a variable. On the 22nd (local time), the U.S. 30-year Treasury yield broke through 5%, considered a psychological resistance level. This was fueled by concerns over an expanding fiscal deficit due to President Trump's large-scale tax cut plan, and if U.S. Treasury yields surge, foreign investors may exit the domestic stock market.

Hana Securities researcher Kim Sang-hoon predicted, "We need to check whether the tax cut plan passes the Senate, but if President Trump continues to pursue a direction of sustained deficits, the bond market could be shaken by the market's 'Sell America' response."

hippo@fnnews.com Kim Chan-mi Reporter