Amid concerns over U.S. rate hikes, KOSPI's push to hold above 7,000 faces a test [Weekly Market Outlook]

[Financial News] Concerns over a September base rate hike are growing after hawkish remarks by Kevin Warsh, chairman of the Federal Reserve System (Fed), and KOSPI's ability to hold above the 7,000 level is expected to be tested this week. The index is likely to be supported by strong South Korean exports and expectations of improved semiconductor earnings, but analysts say solid U.S. employment data could push Treasury yields higher and weigh on the stock market.
According to the Korea Exchange on the 30th, KOSPI closed last week (Aug. 24-28) at 6,788.88, down 1.79% from the previous week. KOSDAQ rose 4.55% over the same period to 838.41. On the Korea Exchange Main Board, foreigners and institutions posted net sales of 8.3143 trillion won and 361.5 billion won, respectively. In contrast, retail investors and other corporate investors were net buyers of 634.4 billion won and 8.0443 trillion won, respectively.
Last week, KOSPI failed to settle above 7,000 despite share buybacks by Samsung Electronics and SK hynix and strong results from NVIDIA Corporation. The large shareholder-return measures announced by Samsung Electronics and SK hynix helped support the index's lower end through buying from other corporate investors, but foreign investors' profit-taking outweighed that support.
NH Investment & Securities set this week's expected KOSPI range at 6,400 to 7,500. It cited rate stability and lower oil prices on the back of U.S.-Iran talks as upside factors, while pointing to profit-taking as a downside risk.
Still, the growing possibility of a U.S. rate hike after the Jackson Hole meeting is a burden. On the 28th local time, Warsh said the Fed should take additional action if it is not convinced that inflation is moving toward its target at a sufficient pace. As a result, the probability of a September rate hike priced into the federal funds rate futures market jumped from 35.4% to 57.5%. In U.S. markets, the S&P 500 Index fell 0.25% and the NASDAQ Composite dropped 0.52%.
Market attention is expected to focus on the U.S. August employment report due out on the 4th. The market expects nonfarm payrolls to rise by 60,000 from the previous month, while the unemployment rate is projected to stand at 4.2%. If employment comes in stronger than expected, expectations for further Fed rate hikes could intensify, adding pressure on Treasury yields. On the other hand, if labor market weakness is confirmed, concerns over rate hikes may ease and help support a rebound in stocks.
Lee Kyung-min, a researcher at Daishin Securities, said, "Based on strong semiconductor earnings and shareholder-return momentum, along with expectations that the Federal Open Market Committee (FOMC) will keep rates unchanged in September, KOSPI will try to reclaim the 7,000 level." He added, "However, if U.S. employment proves stronger than expected, the possibility of additional rate hikes will increase and could put upward pressure on bond yields."
[email protected] Bae Han-geul Reporter