[Preview of Stock Market Factors] KOSPI, Attention to US Inflation Data and Yoon's Impeachment Ruling

# Easing Uncertainty on Trump Tariff Policy Likely # US CPI and PPI Announcements in Focus; Temporary Federal Budget Also Matters This week, the South Korean stock market is expected to experience heightened volatility due to ongoing uncertainty over President Trump's tariff policy, upcoming US economic data announcements, and the potential resolution of domestic political uncertainties. Last week, the KOSPI index was unable to avoid a downturn due to the fallout from President Trump's tariff war. Starting the week around 2,640, the KOSPI fell to as low as 2,550. President Trump has decided to impose tariffs on steel and aluminum for countries, including South Korea, that had previously been exempted, starting from the 12th. Market participants are expected to react nervously to these developments. However, some analysts believe that the uncertainty around tariffs may have already been priced in, and that additional mitigation measures or deferments could ease market anxieties. Daishin Securities' researcher Lee Kyung-min stated, "While anxiety surrounding the imposition of steel and aluminum tariffs may arise, the volatility in the stock market this week is expected to be limited. Although Trump mentioned tariffs on South Korea, negotiations involving shipbuilding and LNG investments could bring a sense of optimism." There are several major external events scheduled for this week. The most significant variables are the US Consumer Price Index (CPI) set to be released on the 12th and the Producer Price Index (PPI) on the 13th. If inflation trends slow, global investor sentiment may improve. Conversely, if inflationary numbers exceed expectations, it could increase downward risk amid foreign selling pressures. Lee Kyung-min noted, “CPI is expected to decline to 2.9% from last month’s 3.0%, and core CPI is anticipated to slow to 3.2% from the previous month. If inflation decelerates, concerns over stagflation, which had been growing mainly in the US, could quickly subside and reinforce expectations for monetary policy.” Attention is also focused on the temporary budget deadline for the US federal government on the 14th. Should the budget resolution pass, there could be an inflow of tax cut expectations, potentially boosting global stock markets alongside the KOSPI. Lee stated, "If the budget resolution passes, U.S. investment sentiment could improve, particularly in mid- and small-cap stocks. However, industries benefiting from the IRA bill may face negative impacts depending on the scale of anticipated budget cuts." Na Jung-hwan, a researcher at NH Investment & Securities, remarked, "It may be difficult to see the passage of the budget bill including tax cuts on the 14th; however, the passage of a budget bill without tax cuts (CR) is possible before the 14th, thereby limiting shutdown risks. Expectations remain as the tax cut bill could be introduced separately to Congress." Political unpredictability remains a factor. Should the impeachment ruling conclude before the 14th, it could alleviate political uncertainty, leading to a stronger won and improved foreign inflows, thus attracting buying interest in domestic sectors such as retail and securities. In the event of an early presidential election transition, policy expectations may provide additional upward momentum. Daishin Securities sees the KOSPI attempting to break past the 2,600 mark amidst pre-empted tariff expectations, reduced US economic uncertainty, and lower interest rate anticipation. NH Investment & Securities set the KOSPI's weekly expected range at 2,500 to 2,650. Regarding notable sectors, Na recommended retail, semiconductors, entertainment, shipbuilding, pharmaceuticals/biotech, and securities. Lee suggested maintaining a buying strategy for sharply truncated sectors like chemicals, semiconductors, secondary batteries, steel, IT home appliances, IT hardware, and automobiles. For utility, transportation, display, banking, and insurance sectors valued low against earnings, he recommended short-term trading. oneway@newspim.com