U.S. stock markets are rebounding after absorbing shock from employment indicators, with the KOSPI and KOSDAQ indexes showing gains early in the session on the 5th. Expectations that the U.S. Federal Reserve (Fed) will lower interest rates in September appear to boost the preference for riskier assets.
The KOSPI index recorded 3201.91 at 9:05 a.m. on the same day, up 54.16 points (1.72%) from the previous day, reclaiming the 3200 mark after three trading days. At the same time, the KOSDAQ index showed an increase of 13.89 points (1.77%) to 797.95.
Most of the top capitalized stocks in the KOSPI market, including Samsung Electronics and SK hynix, are showing an upward trend. In the KOSDAQ market, most top capitalized stocks, including the 'leading stock' Alteogen, Ecopro BM, and Peptron, are trading at higher prices than the previous day.
Overnight, major stock indices on the U.S. New York Stock Exchange were all strong. The Dow Jones Industrial Average rose by 1.34%, the Standard & Poor's (S&P) 500 index increased by 1.47%, and the Nasdaq composite index recorded a rise of 1.95%.
This is because the U.S. labor market is showing signs of rapid slowdown, increasing expectations that the Federal Reserve will cut interest rates. According to the Chicago Mercantile Exchange (CME) FedWatch Tool, market participants in U.S. federal funds futures are reflecting a 94.4% probability of an interest rate cut at the upcoming Federal Open Market Committee (FOMC) meeting in September. After retreating to the 30% range following the July FOMC, expectations have soared again.
The fact that the government and the ruling Democratic Party of Korea are reconsidering the contents of the tax reform plan, which has been deemed inconsistent with the trend of revitalizing the stock market, is also cited as a factor that improved investor sentiment.
Stocks in the banking sector, such as Shinhan Financial Group and KB Financial Group, which faced setbacks after the tax reform plan, along with holdings like Doosan, Hanwha, and LOTTE Corporation, are all showing gains on the same day.
The direction of the tax reform modification is expected to become clearer around the 7th. This is because the Democratic Party of Korea's Policy Committee is expected to gather opinions from within the party over three days and report them to the newly appointed representative, Jeong Cheong-rae.
Han Ji-young, a researcher at Kiwoom Securities, noted, "It is necessary to avoid overreacting to tax uncertainties until the government's position can be officially confirmed before the 7th," and added, "During the discussion, not only the criteria for capital gains tax for major shareholders but also whether the separate taxation of dividends could change in a market-friendly manner might serve as materials for a market reversal."