Kospi Index outlook: top catalysts for South Korean stocks this week

The Kospi Index has wavered in the past few days as the volatility in the semiconductor market remained. It was trading at 6,736 points on Monday, much lower than the year-to-date high of 9,387 points. This article looks at some of the top catalysts for the index this week.

Kospi Index to react to South Korean Central Bank decision

One of the top catalysts for the index will come from South Korea, where the central bank will deliver its interest rate decision on Thursday this week. This decision comes at a time when there are concerns about the country’s inflation as the tech boom leads to higher wages.

The most recent numbers showed that the headline consumer inflation rose 2.8% in July, lower than the expected 3.0%. Core inflation, on the other hand, had the biggest jump in over 2 years, raising concerns that the central bank may decide to hike rates again. It hiked interest rates to 2.75% at its last meeting in a bid to contain inflation. In a recent note, an analyst said:

"Although it is not evident in data yet, we are seeing signs that there ​might be demand-pull inflation going forward. The central bank could wait if inflation were stable ​around 2%, but ⁠now with inflation is already around 3%, it can take a step ahead.”

Another interest rate hike may have an impact on South Korean stocks, which thrives in periods of low rates.

US and Iran crisis may escalate

Another key catalyst for the Kospi Index this week is that the US and Iran crisis may escalate this week. The US has hinted that it will announce a major increase in sanctions in a bid to push the Iranians to the negotiating table. 

Iran, on the other hand, has hinted that it will escalate. It has warned the UAE that it will mess its economy if it attempts to curtail trade between the two countries.

Also, Iran is under pressure as more barrels of oil pass through the Strait of Hormuz. This explains why crude oil prices have remained under pressure, with Brent and the West Texas Intermediate (WTI) falling to $91 and $85, respectively.

Nvidia earnings report

The upcoming Nvidia earnings report on Wednesday will have an impact on South Korean stocks because of its role in the artificial intelligence boom. Analysts expect these results to show that its revenue nearly doubled in the second quarter to over $92 billion. Its guidance for the third quarter is expected to be $103 billion.

Strong Nvidia earnings will be bullish for the Kospi Index because it is a major customer for the two biggest constituent companies, SK Hynix and Samsung. SK Hynix is the biggest HBM supplier to Nvidia. 

Kospi Index technical analysis

Kospi Index chart | Source: TradingView

Technicals suggest that the Kospi Index may rebound in the coming days or months. It has already moved above the 200-day Exponential Moving Average (EMA). 

Also, the index has moved above the descending channel that has been forming since June 19 this year. The two lines of the MACD have continued rising and are about to cross the neutral level. 

Therefore, the index will continue rising in the near term. If this happens, it may jump to the psychological level of 8,000 points in the near term.