The KOSPI index has surpassed the 2900 mark for the first time in 3 years and 5 months. Since the launch of the Lee Jae-myung government, the KOSPI index has been on a continuous upward trend. On the 11th, the KOSPI index closed at 2907.04 points, recovering and nearing its highest level in the past year (52 weeks).
Although there is still a long way to go before achieving the '5,000 P' (KOSPI index of 5000) promised by President Lee Jae-myung, investors' expectations are growing. While a rising stock price is pleasant for investors, there is also the thought that the index cannot continue to rise indefinitely, so the question remains: how long will it go up?
The securities industry continues to express expectations that the KOSPI index could rise to as high as 3240 points by the first half of next year due to the honeymoon rally. However, conditions are attached to this expectation. The resolution of uncertainties surrounding tariffs from the United States is one such condition. It would be icing on the cake if policy expectations that have already been priced in are also met.
These conditions are gradually coming together like pieces of a puzzle.
First, the uncertainty regarding tariffs has somewhat diminished as of last night. The United States and China have begun high-level trade negotiations in London, England, bringing news of hope. The agenda for this negotiation includes China's rare earth exports to the U.S. and the U.S. restrictions on semiconductor exports to China. While specific results of the negotiations have not been disclosed, indications suggest that the export controls may be relaxed.
U.S. President Donald Trump stated through Truth Social on the 11th (local time), "China will supply rare earths on a prepaid basis," adding, "The U.S. will provide what has been agreed upon with China."
He further added, "We are paying a total of 55% in tariffs, while China is receiving 10% in tariffs," stating that "the relationship is very good."
By reaching an agreement on the stringent tariffs the U.S. had imposed on China, the immediate crisis has been averted. Moving forward, attention should be focused on the mutual tariff policy that was deferred in April. The 90-day tariff deferral is set to expire in July. The results of negotiations with major countries, including Korea, by this time are expected to determine the resolution of tariff uncertainties.
Lee Eun-taek, a researcher at KB Securities, noted, "There is a possibility that Trump's tariff threats may resume in the third quarter, and the pressure will intensify," while also stating, "However, there is a high likelihood that the tariff war will enter a phase of agreement by winter."
He also added, "If that happens, investments that had been subdued will regain vigor, and risk appetite will recover," indicating that "around that time, the Federal Reserve is expected to announce interest rate cuts."
Uncertainty indicators have also begun to stabilize. The trade policy uncertainty index has decreased from the 7000 point range in April to the 5000 point range by the end of May, indicating that tariff risks have passed their peak. However, attention should be paid to whether additional tariff negotiations will take place at the G7 meeting starting on the 15th of this month and the NATO summit beginning on the 24th.
The domestic political situation is also showing positive signals. Expectations for policies have already been reflected in the stock market, and the government and ruling party aim for the passage of the supplementary budget during the June extraordinary session. Initially, the scale of the supplementary budget was anticipated to be around 30 trillion won, but it is expected to be in the range of 20 trillion won, excluding the first supplementary budget amount. While this may not meet expectations, it could serve as a lifeline for reviving the stagnant economy.
The market is also showing expectations regarding the supplementary budget. The yield on the three-year government bond, which was at around 2.45% earlier this week, dropped to around 2.419% on the 11th. This suggests that the resolution of uncertainty regarding the scale of the supplementary budget has attracted bargain buying.
Now, what remains to be seen are the corporate performances after the second quarter. Positive signs are emerging, but ultimately, it is the fundamental strength of corporations that will determine the stock market.
Han Ji-young, a researcher at Kiwoom Securities, analyzed, "To continue the rally, improvements in profit outlook, tariffs, and indicators related to the macro environment must accompany it," and added, "From now on, even in an upward environment, heightened stock price volatility is expected, but in the medium term, the main trend of stock prices will be determined by fundamentals."