Jerome Powell, chair of the U.S. Federal Reserve (Fed), has sparked expectations for interest rate cuts, warming up the domestic stock market. The KOSPI index recovered the 3200 level for the first time in about 10 days since the 14th, while the KOSDAQ index approached 800.
Investors are expected to shift their focus to the upcoming U.S.-South Korea summit. Following last month's U.S.-South Korea tariff negotiations, specific implementation plans are expected to be revealed at this summit. Expectations for cooperation between South Korea and the U.S. have already caused stock prices in some sectors, such as nuclear power, to fluctuate.
The KOSPI index closed at 3209.86, up 41.13 points (1.3%) from the previous trading day. Although the KOSPI index started with an increase of 0.88%, it seemed to reduce its gains early in the session. However, it successfully settled above the 3200 mark in the afternoon.
Institutions and foreigners net bought 252 billion won and 26.8 billion won, respectively, driving the index higher. Individuals net sold 386.9 billion won.
The expectation that the U.S. Federal Reserve might embark on interest rate cuts stimulated investor sentiment. In a keynote speech at the Jackson Hole meeting in Wyoming on the 22nd, Powell noted, "Inflation is much closer to our target, and the labor market has cooled," adding, "We need to adjust our policy stance."
The market interpreted these remarks as a significant signal that the Fed is likely to initiate interest rate cuts. The Fed's focus has shifted from concerns about inflation to the labor market, reinforcing the case for interest rate reductions. As the likelihood of a cut in the U.S. benchmark interest rate has increased, funds that had been cautious are now pouring into the stock market.
Kim Jun-young, a researcher at DS Securities, said, "This speech provided the signal the market has been anticipating for interest rate cuts," adding, "It confirmed our confidence that cuts will not stimulate inflationary pressures in the long term, and the preference for risk assets is likely to expand for the time being."
Going forward, investor interest is expected to shift towards the U.S.-South Korea summit and policy issues. President Lee Jae-myung arrived in Washington, D.C., on the afternoon of the 24th (local time) and is set to hold a summit with U.S. President Donald Trump on the morning of the 25th. Economic issues are expected to be on the agenda alongside the South Korea-U.S. alliance.
In particular, a blueprint for follow-up measures related to the tariff agreement reached on the 30th of last month is expected to be outlined. This visit to the U.S. includes major business leaders such as Lee Jae-yong, chairman of Samsung Electronics; Chey Tae-won, chairman of SK; Koo Kwang-mo, chairman of LG; Chung Eui-sun, chairman of Hyundai; and Kim Dong-kwan, vice chairman of Hanwha.
The strong performance of nuclear power stocks in the market that day is also attributed to policy influences. As expectations grow for cooperation between the U.S. and South Korea in the nuclear field at this summit, nuclear power stocks have gained attention. KEPCO has risen by 6.11%, while Doosan Enerbility (5.95%), Hyundai E&C (2.88%), and BHI (1.93%) also showed strong performances.
Lee Sang-heon, a researcher at iM Securities, said, "During the U.S.-South Korea summit, cooperation plans related to nuclear power and the revision of the South Korea-U.S. nuclear agreement are expected to be pursued," adding, "Korea possesses a strong supply chain in nuclear power with excellent project management, construction skills, and equipment manufacturing capabilities, making cooperation with the U.S. essential."
The yellow envelope law and the second amendment to the Commercial Act, which were consecutively submitted to the National Assembly over the weekend, also influenced stock prices that day. The two bills passed through the National Assembly's plenary session amidst controversy, enduring a 24-hour filibuster.
In particular, the passage of the yellow envelope law has led to forecasts that demand for automation will increase, garnering significant interest in robotics-related stocks. It is expected that corporations will accelerate the adoption of robotics and automation facilities to reduce labor union risks. As a result, stocks in robotics, such as Rainbow Robotics (10.08%), Doosan Robotics (4.79%), and NAU Robotics (7.68%), showed broad strength.
The KOSDAQ index closed at 798.02, up 15.51 points (1.98%) from the previous trading day. Foreigners and institutions net purchased 226.8 billion won and 79.2 billion won respectively, while individuals net sold 284.1 billion won.
The KOSDAQ market also showed strength, mainly driven by robotics stocks, while some biotech and entertainment stocks posted significant gains. ABL Bio increased by 8.56% amid expectations that price drops for obesity treatments would expand the beauty market.
On that day, the exchange rate in the Seoul foreign exchange market closed at 1385.5 won, down 4 won (0.03%) from the previous day against the U.S. dollar.