Can the Kospi Extend Its Record Rally? US PCE, Micron Earnings in Focus

Brokerages expect the Kospi to build on last week’s gains. While Iran announced a renewed closure of the Strait of Hormuz on June 20, dialogue between Tehran and Washington is still seen continuing. Investors are also watching for fresh catalysts, including earnings from Micron Technology, which is viewed as a bellwether for the memory-chip industry. The US personal consumption expenditures index due on June 25 could be a swing factor.

On June 21, NH Investment & Securities projected the Kospi would trade in a range of 8,200 to 9,500 this week. The firm expects volatility to persist after the benchmark broke above its intraday record of 9,385 on June 19, then closed lower on news that the signing ceremony for a US-Iran memorandum of understanding to end the war had been delayed.

Last week brought the first Federal Open Market Committee meeting under new Federal Reserve Chair Kevin Warsh. This week, investors will get the May PCE report, one of the Fed’s key inflation gauges for rate decisions.

The consensus forecast for May core PCE, which excludes food and energy, stands at 3.4%, up from 3.3% the previous month. Securities firms say the increase is limited enough that it should not by itself revive fears of additional rate hikes.

Still, equities could come under pressure if the reading exceeds forecasts or if energy-led inflation spreads into the core gauge and services prices. That concern follows the June FOMC, when the Fed raised its 2026 PCE inflation forecast sharply to 3.6% from 2.7%, signaling continued vigilance on prices and reinforcing a hawkish policy stance.

Moon Nam-joong, an analyst at Daishin Securities, said the report, as the first inflation reading released after the June FOMC, could shift market focus toward expectations for hawkish Fed policy later this year. CME FedWatch has also brought forward expectations for a rate increase to September from December, with the probability of a September move at 49.2%, he added.

Lee Kyung-min, also an analyst at Daishin Securities, took the opposite view. If the PCE reading meets or undershoots forecasts, he said, falling oil prices could combine with that outcome to bolster expectations for stability. That, in turn, could help anchor bond yields and the dollar lower and add momentum to stocks.

Another event in focus is Micron’s fiscal third-quarter earnings report. Because Micron reports earlier than other memory-chip makers, its results are often treated as a weather vane for the semiconductor industry.

The market consensus calls for third-quarter earnings per share of $19.92, up 63.3% from the previous quarter and 942.9% from a year earlier. If Micron’s guidance meets or exceeds expectations, optimism over a prolonged upcycle in memory semiconductors could strengthen further.

Lee said Micron’s results could reinforce earnings momentum for South Korea’s semiconductor sector, lifting the upside for chip shares and the Kospi. Any volatility driven by a gap between expectations and reality should be viewed as an opportunity to increase positions, he said.

MSCI’s annual country market classification review is another variable. The global index provider is scheduled to announce its annual market reclassification results on June 24, Korea time. If South Korea is placed on the watch list, the earliest possible announcement of inclusion in the developed-markets index would be June 2027, with actual inclusion possible at the end of May 2028.

MSCI classifies global equity markets into developed, emerging, frontier and standalone categories and operates indexes based on those groupings. Its developed-markets index currently includes 23 countries, including the US, Japan and the UK. South Korea is currently classified as an emerging market alongside China and India.

South Korea was added to MSCI’s emerging-markets index in 1992. In 2008, 16 years later, it was placed on the watch list for possible inclusion in the developed-markets index for the first time. MSCI repeatedly postponed an upgrade, citing difficulties in converting the won and limits on the use of exchange data, and in 2014 removed South Korea from the watch list altogether.

Na Jung-hwan, an analyst at NH Investment & Securities, said watch-list designation would not immediately trigger inflows or outflows from benchmark-tracking funds, with actual inclusion unlikely before 2028. Even so, he said, expectations for a valuation rerating tied to eventual entry into the developed-markets index could support stocks.

Noh Jeong-dong, Hankyung.com reporter dong2@hankyung.com