On the 24th, the KOSPI index surpassed the 3,100 mark for the first time in 3 years and 9 months since September 27, 2021 (3,133.64). This was due to the revived appetite for risk assets fueled by expectations of new government policies and news of a ceasefire between Israel and Iran. However, in the subsequent three days (25th to 27th), foreign investors net sold over 1.5 trillion won, hindering the progress of the Korean stock market, which has a long way to go. The market interpreted this as a realization of profits following a short-term surge.
The inflow of demand and profit realization movements due to policy momentum are expected to repeat this week (June 30th to July 4th). First of all, expectations for the policy are likely to remain valid for the time being. This is because the ruling Democratic Party of Korea has indicated its willingness to pass a supplementary budget plan amounting to 30.5 trillion won before the deadline for the temporary National Assembly session on July 4th.
NH Investment & Securities pointed out the potential for foreign funds to flow in once the policy is confirmed and the trends of individual investors as positive factors. Na Jeong-hwan, a researcher at NH Investment & Securities, said, “The KOSPI index has entered the 3,000s in a short period, prompting some profit realization; however, this is regarded as a healthy correction” and added, “In a situation where funds around the stock market are abundant, it will lead to a sector and stock market driven by policy momentum.”
Lee Jae-won, a researcher at Shinhan Investment & Securities, stated, “Both the KOSPI margin loans (12.3 trillion won) and customer deposits (66.7 trillion won) continue to show upward trends, indicating expectations for an inflow of individual investors.”
There are suggestions that attention should be paid to the results of U.S. economic indicators this week. This is due to the differing positions among Federal Reserve (Fed) officials regarding the possibility of interest rate cuts. While Michelle Bowman, a commissioner appointed by President Donald Trump, and Christopher Waller mentioned the possibility of a rate cut in July, Chairman Jerome Powell and New York Federal Reserve President John Williams are exhibiting a cautious stance.
President Trump is clashing with Chairman Powell over demands for interest rate cuts. After attending the North Atlantic Treaty Organization (NATO) summit in The Hague, Netherlands, on the 25th (local time), President Trump openly expressed his discontent with Powell, stating, “I think he’s terrible.”
Market participants believe that Powell will not yield to Trump’s pressure. This is why attention is being focused on the ISM manufacturing index for June, scheduled for July 1st, and the U.S. employment report for June, due on the 4th. If both indicators show favorable results, the expectations for interest rate cuts will diminish, while poor performance could strengthen the possibility of rate cuts.
Currently, the market consensus indicates that the ISM manufacturing index for June is expected to remain the same as the previous month at 48.5, while non-farm employment is projected to be 116,000, falling below the previous month’s (139,000). Jo Byeong-hyeon, a researcher at DAOL Investment & Securities, reported, “The employment outlook index for CEOs of major U.S. corporations recently announced is the lowest since 2004, excluding the COVID-19 pandemic and the global financial crisis.”
As the deadline for reciprocal tariff negotiations approaches on July 9th, the White House's indication of a possible extension of the deadline is viewed positively by the market. Steven Mnuchin, chairman of the White House Council of Economic Advisers, also noted that it is reasonable to postpone the deadlines for countries showing progress. Hwang San-hae, a researcher at LS Securities, mentioned that reports suggesting European Union (EU) leaders are considering a willingness to lower tariff barriers and expand purchases of American products to persuade Trump are also positive news.