Regular National Assembly inside, FOMC outside…Will KOSPI reach 3300? [Weekly Outlook]

Regular National Assembly session begins…Expectations for Commercial Act amendment

September FOMC: expectations of a US rate cut

The KOSPI index recovered the 3,200 level last week as foreign investors switched to net buying. Securities firms expect that this week (September 8–12) the index could aim for as high as 3,300. U.S. job growth also appeared weak in August, strengthening expectations that the U.S. central bank (Fed) will cut rates at this month's Federal Open Market Committee (FOMC) meeting.

On the 6th, NH Investment & Securities Research Center gave a forecast range for the KOSPI this week of a low of 3,100 and a high of 3,300.

The KOSPI closed around 3,140, down 1% on the first trading day of the month, but rose for four consecutive days starting the next day to recover the 3,200 level. Over the past week, foreign investors were net buyers by 636.7 billion won, while individual and institutional investors were net sellers by 496.7 billion won and 622.1 billion won, respectively.

Securities firms focused on the possibility of a U.S. policy rate cut as an upside factor this week.

U.S. nonfarm payrolls weakened significantly, heightening expectations that the pace of rate cuts will accelerate. According to the U.S. Department of Labor on the 5th, August nonfarm payrolls increased by only 22,000, well below the market estimate of 75,000. If U.S. employment data are weak, concerns about an economic slowdown increase, making it more likely that the Fed will cut rates to defend employment and growth.

Na Jeong-hwan, a researcher at NH Investment & Securities, said, "The probability of a 25bp cut in the policy rate at the FOMC meeting scheduled for the 16th–17th of this month is 99%," adding, "The important thing is that this rate cut is not a one-off but the start of a cut cycle, so attention should be paid to the impact of rate cuts on the stock market."

He said, "After the Fed's rate cut in September, the market will begin searching for beneficiaries of the rate cut," and "In the case of the Korean stock market, it could act as a factor that brings in foreign capital and raises valuations." He analyzed that a favorable environment would be created for new growth industries such as artificial intelligence (AI) and biotech.

He emphasized that it is time to look again at the AI software sector, which had been lagging in share performance, as it is an industry targeted by government policy. Na said, "Next year's Korean government budget has been set at 728 trillion won, an 8.1% increase from this year, and the budget items that increased significantly are investments in new technologies such as AI," adding, "Next year's research and development (R&D) budget is set at 35.3 trillion won, a 19.3% increase from this year."

He continued, "The government is focusing on an AI transformation (AX) policy that applies AI to physical industries such as robots and automobiles as well as on GPU purchases and increasing AI graduate programs," adding, "A call for applications for the 'AI Specialized Model Project,' which supports 512 B200 units for companies eliminated after the 'independent AI project,' will be announced soon, which means attention should also be paid to small- and mid-sized AI companies."

Attention is also focused on the regular session of the National Assembly, which began in earnest this month. Na said, "Starting with the September regular session of the National Assembly, expectations for amendments to the Commercial Act are expanding, creating an environment where value stocks are still preferred, with some holding companies and securities stocks rebounding," adding, "Since amendments to the Commercial Act, such as share buybacks and cancellations, are expected to be discussed at the September regular session, we recommend the holding company and securities sectors."

Shin Min-kyung, Hankyung.com reporter radio@hankyung.com