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Last week was a week of deep differentiation by stock, with the KOSPI dropping by -1.18%p and the KOSDAQ by -0.28%p on a weekly basis while major domestic and foreign companies announced their 3rd quarter earnings.
While the domestic stock market fell weekly and monthly, the US stock market showed a decoupling phenomenon as both weekly and monthly gains and all-time highs were recorded. Foreigners also continued to sell in the domestic stock market due to inflation concerns and uncertainty about the FOMC in November. As the tapering official is expected at this week’s FOMC (2nd-3rd), the volatility market is expected to continue while checking the results of major economic indicators.
What the market is concerned about at this point is the decoupling that occurred during the tapering phase in the past. After the announcement of the tapering in December 2013, the US S&P 500 rose 9.5%p during the tapering period from January to October 2014. On the other hand, decoupling intensified, with Korea rising by 1.0%p and emerging countries declining by 0.2%p. It is believed that the sluggish domestic stock market at the time was more due to the slowdown in profits than simply concerns about a decrease in global liquidity due to tapering. Considering that the current trend of earnings leveling is continuing into next year, unlike at the time, it is unlikely that the market environment at the time of tapering in 2014 will be repeated.
Given the attractive valuation level, we believe downward pressure on the stock market will be limited. Therefore, it is necessary to pay attention to the industry cycle rather than the change in the stock market level. Both markets need to be careful in December when there is an issue of capital gains tax for large shareholders. In November, before that, the KOSDAQ usually showed a relatively strong trend.
This week’s main schedule is △Korea October import and export, U.S. October Markit manufacturing PMI, ISM manufacturing PMI △2nd U.S. FOMC (2nd~3rd) △3rd U.S. October ISM service △ 5, the U.S. October unemployment rate and non-farm payroll employment.
Jaeyang Kim, Deputy Manager, Ulsan Branch, KB Securities
※This material is the personal opinion of the contributor
