With the KOSPI index setting a record high day after day last week (the 4th–8th) and nearing the 7,500 level, investors are focused on whether the rally will continue this week. Experts say if inflation fears that could reemerge after the U.S. consumer price index (CPI) release collide with expectations for semiconductor earnings, the index could swing widely.
As the truce between the United States and Iran drags on, the impact of the Iran war on the stock market is waning. However, price indicators that can confirm how much the surge in international oil prices after the outbreak of war has affected inflation will be released.
On the 12th (local time), the U.S. CPI for April will be published. If inflation jumps by more than experts expect, concerns about a tightening monetary policy could grow. Conversely, if inflation remains stable despite higher international oil prices, stocks could gain momentum.
Junghyun Kim, an analyst at Kiwoom Securities, said, "Financial markets have already priced in expectations that U.S. inflation will come in at a fairly high level," and added, "If the inflation level does not significantly exceed market expectations, the negative impact on financial markets will not be large."
Even so, inflation concerns are likely to persist for the time being. Although prices have been volatile, international oil prices remain elevated, increasing corporations' expense burdens.
The results of the U.S.-China summit scheduled for the 14th–15th could also affect the market. As the first U.S.-China summit since the launch of the second Trump administration, negotiations are expected across trade, technology and security issues.
Kim said, "Along with the possibility of easing tariff disputes, whether there will be negotiations on supply chains for semiconductors and rare earths is a key point to watch," adding, "Differences in the two countries' perceptions and response directions on Middle East issues, including Iran, are also likely to be discussed."
At a time when first-quarter earnings season is nearing its end, if solid listed companies continue to report strong results, it could add a tailwind to the market.
In particular, in the domestic market, there are projections that a bull run will continue in sectors such as semiconductors, power equipment, securities, defense, and renewables, where structural demand is clear and corporations' profits are being confirmed.
Notably this week, large firms such as Samsung Securities, Mirae Asset Securities and Korea Investment & Securities Co. will release results. S-Oil, Lotte Shopping and Lotte Chemical will also disclose earnings.
Najunghwan, an analyst at NH Investment & Securities, said, "It is effective to build a portfolio with existing leaders such as semiconductors and power equipment and with blue chips whose earnings improvement is entering full swing." NH Investment & Securities expected the KOSPI to trade in a 6,900–7,800 range this week.
Jaeseung Kim, an analyst at Hyundai Motor Securities, said, "While earnings forecasts for KOSPI-listed companies are being raised sharply, the degree of upward revision is limited when excluding semiconductors," adding, "It is better to concentrate investments in the semiconductor sector, where fundamentals are improving, and in the power equipment sector that benefits from artificial intelligence (AI) infrastructure."
Kim added, "Beyond semiconductors and power equipment, the portfolio should be maintained with sectors such as securities, defense and renewable energy."
The flow of foreign funds is also a factor to watch. Recently, major securities firms are preparing to launch integrated accounts for foreign investors and, through collaboration with overseas brokers, are improving access to investing in domestic stocks.
Na added, "Expectations are growing that foreign retail money could flow into the domestic stock market, and it is also meaningful in terms of meeting the requirements for inclusion in the MSCI developed markets index over the mid to long term and resolving the undervaluation of the Korean market."