It was a week of clearing a big mountain. In the wake of the Asia-Pacific Economic Cooperation (APEC) summit, the Korea-U.S. summit wrapped up trade talks, and the U.S.-China summit also entered a "one-year truce." The U.S. Federal Reserve (Fed) held its Federal Open Market Committee (FOMC) meeting in Oct. and, as the market expected, cut the benchmark interest rate by 0.25 percentage point. It also decided to halt quantitative tightening (QT) starting in Dec.
The domestic stock market also extended gains. The KOSPI first broke above 4,000 on the 27th and then climbed to a closing 4,107.5 on the 31st. The KOSDAQ rose above 900.
Lee Kyung-min, a researcher at Daishin Securities Co., said the KOSPI's forward price-earnings ratio (PER, market capitalization ÷ net income) reached 12 times, creating short-term overheating pressure, but added that a sharp expansion in volatility is limited given stable metrics such as the margin loan balance ratio. Lee said, "From a mid- to long-term perspective, a major bull run in the stock market is underway," adding, "It is valid to maintain equity weightings and buy on pullbacks."
With major events over, this week (Nov. 3-7) is likely to see mixed performances by stocks as corporations release their third-quarter (July-September) results. So far, the operating profits of corporations that released third-quarter results have beaten market expectations by an average of 6.4%. Even excluding semiconductors, they are about 2.1% higher.
Sectors with recently raised earnings forecasts include semiconductors, information technology (IT) hardware, shipbuilding, defense, securities, and refining. Kang Jin-hyuk, a researcher at Shinhan Investment & Securities, said to focus on artificial intelligence (AI), semiconductors, secondary batteries, and industrial corporations' results. Conversely, he said selling could emerge, centered on sectors tied to Chinese consumption following APEC.
Yoo Myung-gan, a researcher at Mirae Asset Securities, advised that, in addition to leading sectors, it is worth paying attention to biotech, finance, and holding companies. Yoo said, "The fourth quarter (Oct.-Dec.) is peak season for biotech deals," adding, "Attention should also be paid to the third amendment to the Commercial Act, centered on mandatory cancellation of treasury shares, and to the separate taxation rate on dividends income."
U.S. jobs and inflation indicators bear close watching. After the Oct. FOMC, Federal Reserve Chair Jerome Powell voiced caution at a press conference, saying nothing had been decided on a rate cut in Dec. The market is more likely to react sensitively to jobs and inflation data.
With the U.S. federal government shutdown (temporary suspension of operations) delaying the release of government jobs and inflation data, private indicators could serve as a gauge. The Institute for Supply Management (ISM) will release the Oct. manufacturing purchasing managers index (PMI) on the 4th, and Automatic Data Processing (ADP) will provide a weekly employment snapshot on the 5th.
The movement of the won-dollar exchange rate against the U.S. dollar is also cited as a factor that could affect the market. Although Korea-U.S. trade talks have wrapped up, the won-dollar rate is nearing 1,430 won. What has lifted the domestic market so far is foreign capital. Foreign funds began to flow in in earnest from mid-Apr., when the won-dollar rate moved in the mid- to high-1,400 won range, and if the won weakens further, they cannot ignore potential FX losses.
However, Na Jeong-hwan, a researcher at NH Investment & Securities, said, "As a result of the Korea-U.S. trade talks, the annual cash investment amount is capped at up to $20 billion, and given the financial authorities' strong intention to manage exchange rate volatility, the won-dollar rate is likely to face downward pressure," adding, "From the perspective of foreign investors, FX gains can be expected, so rather than outflows, funds could be maintained or flow in."