Kospi Seeks Direction Ahead of Fed FOMC, Samsung Electronics and SK Hynix Earnings

South Korean stocks are poised to search for direction this week as investors digest the US Federal Open Market Committee meeting and third-quarter earnings from Samsung Electronics Co. and SK Hynix Inc., with the Kospi expected to consolidate near its recent lows.

NH Investment & Securities on October 25 forecast the Kospi would trade in a 5,100-6,400 range this week. The benchmark index held the 5,500 level on October 23 after trimming losses when SK Hynix said it would stop reviewing an initial public offering for its US subsidiary Solidigm.

Investor attention is centered on the Fed's October 27-28 FOMC meeting. The rate decision is due at 2 p.m. on October 28 in Washington, or 3 a.m. in Seoul on October 29.

Markets had initially favored another rate increase following last month's move by the US central bank. That view softened after New York Fed President John Williams said inflation remains too high and another rate increase later this year could be appropriate, while adding that policymakers have time to review incoming data and do not need to rush because of the action taken at the September meeting.

The probability of a 25-basis-point increase in October reflected in CME FedWatch also fell to about 50% from 70% after Williams's remarks.

Lee Kyung-min, an analyst at Daishin Securities, said the market would focus more on the future path of monetary policy than on the rate decision itself. A stronger-than-expected US consumer price index reading for September, along with lingering inflation pressure from rising oil prices, could limit any stock rebound if the Fed reinforces its tightening path at this meeting, he added.

In South Korea, third-quarter earnings from Samsung Electronics and SK Hynix are a key variable. SK Hynix will release results on October 28 and Samsung Electronics on October 29.

Samsung Electronics earlier said in its preliminary third-quarter results that it posted operating profit of 107.4 trillion won. SK Hynix is also expected to post record earnings. Consensus compiled by the securities industry puts SK Hynix's third-quarter revenue at 98.2257 trillion won and operating profit at 76.964 trillion won.

Even so, investors may focus less on the headline earnings figures than on the profit outlook and additional shareholder return measures. Concerns about the sustainability of AI spending have grown after worries over credit risk tied to US company CoreWeave's corporate bonds and the financial burden from Meta Platforms Inc.'s expanded investment in artificial intelligence came into focus.

Samsung Electronics and SK Hynix recently completed share buybacks worth about 15 trillion won and 40 trillion won, respectively. Samsung has also said it plans additional shareholder returns of as much as 110 trillion won this year.

The market is watching whether Samsung will announce additional cash dividends and share buybacks and cancellations. Investors are also looking to see whether SK Hynix will unveil further shareholder return measures to ease concerns over a duplicate listing that emerged during the review of a Solidigm listing.

Na Jung-hwan, an analyst at NH Investment & Securities, said SK Hynix is estimated to have more than 30 trillion won available for additional shareholder returns. If a large-scale share buyback is confirmed, purchases by other corporations could absorb part of foreign investors' selling and help ease the Kospi's supply-demand imbalance.

Hwang San-hae, an analyst at LS Securities, said semiconductor earnings should help curb share-price volatility stemming from macroeconomic anxiety. Still, he said the market is more likely to build a floor through broader participation than stage a sharp rebound in the index. He advised investors to keep exposure to defensive sectors rather than indiscriminately increasing positions based solely on valuation appeal.