Last week, the domestic stock market fell after the global credit rating agency Moody's downgraded the United States' credit rating. The surge in U.S. Treasury yields, among other factors, heightened instability in the financial market. During the week of May 19-23, the KOSPI index started at 2,626.87 points and fell 1.32% to 2,592.09 points, retreating from the 2,600 level. The KOSDAQ index dropped 1.25% from 725.07 points to 715.98 points.
The selling pressure from foreign investors in the domestic stock market has resumed. Last week, foreigners net sold 336.7 billion won worth of domestic stocks, contrasting sharply with the previous week's net purchase of 975.8 billion won. Institutions also sold 621.2 billion won worth last week.
This week (May 26-30), there are no significant domestic or international events, except for NVIDIA's first-quarter earnings announcement. However, if presidential candidates make additional promises to revitalize the stock market ahead of the presidential election on June 3, it could serve as a factor for an increase in the domestic stock market.
As all major presidential candidates have shown a willingness to revitalize the stock market, analyses suggest that there is a high likelihood the stock market will rise following the establishment of the new government. Kim Moon-soo, the People Power Party candidate, visited the Korea Exchange Seoul office on May 22 and noted, "We will establish a separate taxation system for dividend income and provide tax benefits for long-term stock investors to invigorate the stock market." The proposal involves different withholding tax rates on dividend income based on the investment period for those holding long-term stocks worth more than 20 million won.
Lee Jae-myung, the Democratic Party of Korea candidate, promised last month to bring about a 'KOSPI 5000' era and stated that he would raise stock prices by strengthening shareholder rights to address the undervaluation of the Korean stock market (the Korea discount). Lee Jun-seok, the Reform Party candidate, has yet to propose measures to invigorate the stock market during his campaign, but last year, the Reform Party stated that they would create a 'KOSPI 5000, KOSDAQ 2000 era' while announcing measures to improve corporate governance among listed companies.
The stocks expected to attract attention after the presidential election include holding companies and those with low price-to-book ratios (PBR). Eom Soo-jin, a researcher at Hanwha Investment & Securities, stated, "If the Democratic Party of Korea wins power, amendments to the Commercial Act will be swiftly re-pursued, and even if another party comes to power, policies to resolve the Korea discount will be introduced in some way."
Hanwha Investment & Securities predicts that once the amendments to the Commercial Act are confirmed, corporations facing significant governance controversies, those involved in management disputes, corporations with low internal transaction ratios, and those with a high likelihood of stock buybacks are expected to benefit. Related stocks include Kolmar Holdings, Youngone Holdings, SAJO INDUSTRIES, Kumho Petrochemical, and Korea Zinc.
On May 28 local time, NVIDIA's first-quarter earnings (for February to April) announcement is scheduled. The earnings conference call will take place at 6 a.m. on May 29 Korean time. Earlier, NVIDIA projected a revenue guidance of approximately $43 billion (about 59 trillion won) for this quarter, anticipating a 65% increase compared to the previous year.
Na Jeong-hwan, a researcher at NH Investment & Securities, noted, "NVIDIA is simultaneously exporting AI chips to Middle Eastern countries like Saudi Arabia and the United Arab Emirates while facing restrictions on GPU exports to China, which may offset some of the impact on this year's performance."
On May 27, the durable goods orders index reflecting the U.S. economic sentiment will also be announced. If the index worsens compared to March, which saw a surge due to pre-orders, it may strengthen expectations for a U.S. interest rate cut.
NH Investment & Securities predicts that the KOSPI index will fluctuate between 2,550 and 2,690 points this week. Researcher Na stated, "The potential for a rate cut by the U.S. Federal Reserve due to NVIDIA's impressive performance and poor U.S. economic indicators will act as a positive factor for the domestic stock market, while accelerating capital outflows to the U.S. and short-term profit-taking will act as negative factors."