KOSPI index, eyeing the U.S. FOMC and taking a breather? [Preview of today's session]

The KOSPI index is expected to show a 'cautious market' as it watches the U.S. Federal Open Market Committee (FOMC) meeting on the 10th. The market, having already priced in a rate cut, is focusing on next year's interest rate path. The FOMC will release the Summary of Economic Projections (SEP) and next year's interest rate dot plot at this meeting.

The KOSPI index closed at 4,143.55, down 0.27% from the previous trading day. The prices of top market-cap stocks in the Korea Exchange's main market were mixed. Samsung Electronics(-1%), SK Hynix(-1.91%), LG Energy Solution(-1.77%), and Hyundai Motor(-2.69%) fell, while Samsung Biologics(1.9%) and Hanwha Aerospace(2.45%) rose. Shipbuilding and engine equipment-related stocks such as HD Hyundai Heavy Industries, Samsung Heavy Industries, HD Hyundai Marine Solutions, HD Korea Shipbuilding & Offshore, Hanwha Ocean, and Hanwha Engine saw a sector-wide tailwind from consecutive order announcements.

Overnight, the three major U.S. stock indexes closed mixed. The Dow Jones Industrial Average closed at 47,560.29, down 0.38% from the previous close. The Standard & Poor's (S&P) 500 index closed at 6,840.51, down 0.09%, while the tech-heavy Nasdaq closed at 23,576.49, up 0.13% from the previous trading day.

With expectations for a policy rate cut growing ahead of this FOMC meeting, the market is on edge over what Fed Chair Jerome Powell will say about the future path of interest rates at the press conference and how the members view the rate path in the dot plot. The FOMC meeting that sets the U.S. policy rate is scheduled for the 9~10th.

Han Ji-young, a researcher at Kiwoom Securities, said, "Changes to next year's interest rate dot plot to be released at this meeting will be a main battleground for market participants," adding, "We should also pay attention to whether the Federal Reserve (Fed) officials resolve internal differences of opinion."

Advice also suggests paying more attention to the KOSDAQ index toward the year-end. The 'Santa rally,' in which stock prices rise around the year-end and the start of the year, was analyzed to appear more clearly in the KOSDAQ market than in the KOSPI market.

Yuanta Securities, in its report "Santa's sleigh is pulled by KOSDAQ," viewed the Santa rally as an extension of the 'turn-of-the-month effect' and examined whether returns at the end and beginning of the month actually outperform returns during the rest of the period. The turn-of-the-month effect refers to a phenomenon in which short-term liquidity concentrates at the end and start of the month as market participants review and adjust portfolios, causing returns to move more significantly than usual or generating excess returns.

Shin Hyun-yong, a researcher at Yuanta Securities, said that, based on an examination of the KOSPI since 2000, the proportion of times that end-of-month and start-of-month returns outperformed returns during the rest of the period was about 44.4%. In December, this ratio was about 40.0%. In other words, Santa appears in the KOSPI market roughly once every two years.

In the KOSDAQ market, the proportion was 49.2%, higher than the KOSPI but not by a wide margin. However, in December, that proportion reached 76.0%, making the Santa rally more pronounced.

Reporter Eunhyuk Ryu ehryu@hankyung.com