Korea's stock market is poised for a volatile week as investors brace for the U.S. midterm elections and key economic data releases. The securities industry is advising a strategy of buying in tranches below the KOSPI 6,000 level, citing undervaluation in the domestic market.
Polls suggest Democrats are likely to retake the House, with a tight race in the Senate. A "blue wave" could constrain the Trump administration's fiscal expansion and tax cut policies. Market uncertainty is expected to ease once the election concludes, regardless of the outcome. Na Jeong-hwan of NH Investment & Securities noted that export controls for advanced technology will continue, but eased fiscal burdens could create a favorable environment for growth stocks.
Major economic indicators, including the U.S. ISM manufacturing index, ADP private employment data, JOLTS, ISM services PMI, and nonfarm payrolls report, will be released throughout the week. Nonfarm payrolls are expected to show a modest increase in new jobs, with the unemployment rate holding around 4.2%. The U.S. employment data will influence the Federal Reserve's year-end rate decision.
Last week, Korea's stock market saw a sharp correction, with the KOSPI falling 3.5% and the KOSDAQ dropping 3.8%. The KOSPI closed October trading at 5,730.74, while the KOSDAQ ended at 724.38. Researcher Na Jeong-hwan highlighted that the KOSPI is rebounding in the low 5,000s, with attention focused on stocks rising alongside an expansion in transaction value.
The securities industry analyzed that the KOSPI has reached an extremely undervalued zone at a forward price-earnings ratio (PER) in the 4-times range. However, a sustained upward rally will require confidence in profit momentum for next year and 2028, as well as continued inflows of net foreign buying. Researcher Lee Jae-won of Yuanta Securities Korea recommended gradually increasing exposure below KOSPI 6,000 points and maintaining semiconductor-centric positions.
Researcher Cho Byung-hyun of Daol Investment & Securities noted that the Korean stock market's undervaluation reflects earnings discounts. He advised setting a conservative upper target within 6,600 points if a positive catalyst appears.