Since the outbreak of the Iran war, a "roller-coaster market" has continued, with stock indexes surging and plunging repeatedly depending on related news. The war, now more than a month old, has pushed up international oil prices, raising concerns that major countries' Central Bank will tilt their monetary policy stance toward tightening to counter inflation. In other words, more headwinds are emerging that reduce appetite for risk assets.
This week's (April 6–10) stock market is highly likely to follow a similar pattern to last week. Negotiations between the United States and Iran are not expected to go smoothly, and U.S. President Donald Trump is fueling market anxiety with unexpected remarks.
Last week, the KOSPI index saw dizzying day-to-day swings. After falling 3–4% on March 30–31, the index surged more than 8% on April 1. It then plunged more than 4% on the next trading day before jumping 3% on the 3rd.
The news set to affect this week's market is not limited to the Iran war. First, earnings releases that can confirm the actual performance of the semiconductor sector, which has led the bull market, are scheduled. Samsung Electronics plans to announce its preliminary results for the first quarter on the 7th. With March exports hitting an all-time high led by semiconductors, investors are focused on how much Samsung Electronics' results may have improved.
On the 8th, the minutes of the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve Board held last month will be released. At the first FOMC meeting after the Iran war broke out, it will be possible to see how Fed members assessed the rise in international oil prices and its impact. The U.S. March consumer price index (CPI) will also be released on the 10th.
Kim Yu-mi, an economist at Kiwoom Securities, said, "If international oil prices do not fall quickly from current levels, caution about inflation could rise further," and noted, "The March FOMC minutes to be released during the week will likely show how Fed members recognize the inflation impact of the Iran war." Kim analyzed that "there is also a possibility that a somewhat hawkish (preference for tighter currency policy) tone has formed."
This is why some advise considering a conservative strategy rather than actively buying stocks. The Yeouido securities community, which until before the war had forecast a first-half bull market, has significantly changed its view.
Shin Eol, a researcher at Sangsangin Investment & Securities, said, "If the war ends, market participants would welcome it, but the method and timing of ending the war are unknown," adding, "It is still too early to make aggressive investments." Shin said, "It is better to build a thicker safe-asset portfolio centered on developed countries and selectively invest in risk assets as part of expanding dollar positions."
Even so, there are growing calls to consider investing in the IT sector, where strong earnings are expected.
According to NH Investment & Securities, the first-quarter operating profit consensus for Samsung Electronics has been revised up 10% from a month ago and is currently around 40 trillion won. March exports rose nearly 50% from March a year earlier to record the highest growth rate ever, and semiconductor exports increased 151%, marking triple-digit growth for three consecutive months. Also, given the high won-dollar exchange rate, earnings in export sectors such as semiconductors are likely to be strong.
Cho Byung-hyun, a researcher at Daol Investment & Securities, said, "With March exports hitting an all-time high, expectations are high for first-quarter earnings improvement centered on Samsung Electronics," adding, "We recommend building weight in the IT sector when share prices fall."
There is also strong interest in sectors that can rise regardless of the outcome of the war. Na Jeong-hwan, a researcher at NH Investment & Securities, said, "Demand for air defense systems and energy self-sufficiency will steadily increase during and after the war," adding, "After the war, deals (transactions) related to weapons stockpiling among countries and building responsive air defense systems could emerge, so it is necessary to maintain a high allocation to growth-infrastructure-related sectors such as semiconductors, defense, power equipment, and nuclear power."