Pause expected amid Middle East risks... Valid long-term upward trend due to foreign buying
Middle East military crisis triggered by Israel attack (Source: CBS News)
This week, the domestic stock market is expected to show a short-term consolidation phase as Middle Eastern geopolitical tensions stemming from the Israel-Iran military conflict and profit-taking move overlap. However, as the continuous net buying trend of foreign investors continues, it is analyzed that the medium- to long-term upward trend is valid.
According to the Korea Exchange on the 15th, last week (June 9-13), the KOSPI closed at 2,894.62, up 2.93% (82.57 points) from the previous week. The KOSPI, which had been on an upward trend, stopped its 8-day rally and turned downward on the 13th with news of Israel's airstrike on Iran's nuclear facilities.
Han Ji-young, a researcher at Kiwoom Securities, analyzed, “Israel’s airstrike is serving as a justification for short-term adjustments,” and “The key variable affecting the market will be whether Iran’s nuclear facilities suffered substantial damage and the level of retaliation.”
On the other hand, the view that the impact of geopolitical risk is temporary is dominant. Lee Kyung-min, a researcher at Daishin Securities, said, “Geopolitical uncertainty can affect short-term sentiment, but the perspective of foreign investors remains positive,” and “In the last seven trading days, foreigners have net bought more than 4 trillion won, betting on the rise of the Korean stock market.”
There is also a view that there is upward momentum in policy aspects. In addition to issues that raise expectations to resolve the 'Korea Discount', such as the amendment of the Commercial Act, the policy direction of the new ruling party leadership is expected to play an important role in the future stock market trend. However, researcher Lee Kyung-min added, “Since the amendment to the Commercial Act has been delayed, market reactions can be adjusted depending on the speed of policy implementation.”
Meanwhile, the G7 summit, which opens on the 15th, is also noteworthy. As it is President Lee Jae-myung's first major diplomatic stage after inauguration, various messages such as the external policy stance, trade policy direction, and the possibility of changes in inter-Korean relations may emerge. NH Investment & Securities researcher Na Jeong-hwan diagnosed, “If a summit between President Lee and President Trump is realized, short-term interest may be focused on inter-Korean cooperation-related stocks.”
In conclusion, this week's KOSPI may experience adjustments amid geopolitical concerns and the process of digesting short-term sell-offs, but it is expected to support a medium- to long-term upward trend due to improved foreign supply and demand, policy expectations, and global meeting variables.