Concerns over 'Tariff War' Ease... Will the Supplementary Budget Revive KOSPI? [Weekly Outlook]

As concerns over tariffs subside, the Bank of Korea's Monetary Policy Committee and the government's supplementary budget announcement are scheduled for this week.

On the 13th, NH Investment & Securities suggested a KOSPI forecast band of 2350-2550 for this week. Compared to the closing price on the 11th (2432.72), this leaves a bit more room for the index to rise.

It is analyzed that the anxiety related to President Trump's tariff war has passed its peak. As the global financial markets, including the U.S., were significantly shaken, President Trump announced on the 9th (local time) via his social networking service (SNS) that he would defer reciprocal tariffs on all countries except China for 90 days and impose only a basic tariff of 10%. Although the U.S. and China are engaged in a 'chicken game' imposing tariffs of 145% and 84% respectively on each other, President Trump also mentioned in a cabinet meeting on the 10th (local time) that he wants to negotiate with China.

Sang-Jun Lee, a researcher at NH Investment & Securities, said, "Although the U.S.-China tariff war continues, it has been confirmed that President Trump does not want an extreme situation like a hard landing in the asset market due to the deferral of reciprocal tariffs," adding, "While aftershocks are possible, it is time to test the bottom of the index."

There is also an analysis that it is too early to be relieved. Kyung-Min Lee, a researcher at Daishin Securities, said, "Volatility in the upper and lower bounds is inevitable depending on major remarks and results of tariff negotiations between President Trump, Chinese President Xi Jinping, and the U.S. and other countries."

There are also many variables in Korea's tariff negotiations with the U.S. Jin-Hyuk Kang, a researcher at Shinhan Investment Corp., said, "Tariffs on items such as semiconductors remain a stumbling block," adding, "There may be joys and sorrows (by sector) depending on bilateral negotiations related to defense costs, trade balance, and the Alaska natural gas development project."

There is growing support for the outlook that domestic consumption-related industries, which are free from tariff-related uncertainties, will be promising next week. The government is scheduled to announce a supplementary budget of 10 trillion won next week, and as the early presidential election phase begins, pledges for economic stimulus may also emerge.

Researcher Jin-Hyuk Kang said, "In terms of profit momentum, essential consumer goods, cosmetics, and clothing, etc., are positioned in a turnaround phase," adding, "With expectations for policy-driven expansion of consumption propensity and margin improvement, domestic consumer goods can once again demonstrate their potential as a refuge under external uncertainties."

Attention is also focused on the Bank of Korea's Monetary Policy Committee meeting on the 17th. Researcher Kyung-Min Lee expected, "As expectations for the supplementary budget increase, if (the Bank of Korea's) accommodative monetary policy stance is added, domestic financial market anxiety can be alleviated and investor sentiment can also improve."

Han Kyung-woo, Hankyung.com reporter case@hankyung.com