Top catalysts for South Korea’s Kospi Index this week

The Kospi Index is stuck in a local bear market after falling 21% from its year-to-date high. It ended the week at 7,475, down sharply from the year-to-date high of 9,387. This article highlights some of the top catalysts for South Korean stocks this week.

Kospi Index to react to SK Hynix US IPO

The Kospi Index will react to last Friday’s SK Hynix US IPO that saw it raise over $26.5 billion. Its stock jumped by over 13% on its first day as brokers rushed to fill pre-orders. 

The IPO happened when South Korean stocks were closed, meaning that investors in the country will have a chance to respond to the listing. 

A key risk for SK Hynix is that most recently-launched IPOs normally jump initially and then retreat shortly after that. This happened with most IPOs, with SpaceX stock falling to a record low. Other companies like Circle, Figma, and Klarna have all plunged after the initial surge faded. 

The Kospi Index will be highly volatile in the new week as we have seen in the past few weeks. It has been normal for the index to jump and retreat by as much as 10% within a session, and this trend will likely continue this week.

South Korean Central Bank decision

The Kospi Index will react to the upcoming South Korean Central Bank interest rate decision, which will happen on Thursday this week. 

Top analysts expect that the central bank will hike interest rates by 0.25% to 3%. This hike will be because of its attempts to boost the South Korean won, which plunged to a record low against the US dollar recently. 

The rising optimism that the central bank will hike interest rates explains why the USD/KRW pair has plunged in the past few days. It has slumped from a high of 1,560 on June 5 to the current 1,500. Technically, the pair has formed a double-top pattern, pointing to more downside in the near term. 

South Korea’s central bank is concerned about inflation as semiconductor companies boost their bonuses to workers. Recent data showed that the country’s inflation jumped to the highest level in over 2 years. As such, the rate hike is expected to slow the economy down and put inflation in check. A more hawkish central bank may affect the performance of South Korean stocks and fuel volatility.

Key South Korean macro data

The Kospi Index will react to the upcoming macro data from South Korea. For example, the country will publish the latest import and export price index reports on Wednesday. 

It will also release the June import and export data on the same day. Economists expect the data to show that exports surged by 70.9% in June, while imports rose by 30%, leading to a trade surplus of over 36 billion KRW. These numbers will provide more information about the state of the South Korean economy.

US and Iran tensions

The Kospi Index will also react to the ongoing developments between the US and Iran. The two sides restarted their fighting during the weekend, with the US launching attacks against several Iranian targets. Trump has already declared the ceasefire to be over, and warned Iran of destruction if it killed him.

Crude oil prices have already jumped on Hyperliquid, and the trend may continue this week, affecting the South Korean economy. The country imports most of its oil from the Middle East. 

Separately, the index will also react to key earnings from the biggest American banking groups, including Goldman Sachs and JPMorgan.