Kospi 2,700 Selling Wall... Conservative Until Fed's Stance Shifts

He advised that when investing in stocks, one must always consider the market's ups (rising trends) and downs (falling trends). This means investors need to closely observe changes in the macroeconomic environment and respond accordingly.

Next year's business plans also need to be re-evaluated under new exchange rates. He judged that the current rapid fall in the exchange rate is a very uncomfortable situation for export companies.

Department Head Moon Hong-cheol pointed out human nature's tendency to worry about the exchange rate when it rises and when it falls. This means market participants always find reasons for anxiety. This suggests that investment decisions are heavily influenced by psychological factors rather than objective facts.

The exchange rate is simple, said Department Head Moon Hong-cheol. If exports do well, the exchange rate falls. Because exports constitute a large portion of the Korean economy, the exchange rate reflects this. He analyzed that the recent exchange rate, which had deviated significantly from fundamentals, is now normalizing. However, irrational investments by market participants are greatly distorting this direction.

Department Head Hong Sun-ae pointed out that the lower support line (around 1,400 won) that had been maintained for seven years in the exchange rate chart was broken by a large bearish candle. Technically, this is a very strong bearish signal. The first retracement target is 1,320 won, and if it falls further, it could reach 1,250 won. She explained that any investor doing technical analysis could read the signal, "Now it must go down," and it has indeed moved as expected.

Department Head Moon Hong-cheol linked the side effects of a stronger won to semiconductor price increases. This means that even if semiconductor prices rise by 70%, the exchange rate still has a 10-15 percentage point impact. There is concern that big tech companies, needing to purchase semiconductors, might see some demand reduction due to the stronger won. While AI facility investment is expected to increase by 60-70%, the worsening exchange rate could partially offset this. Ultimately, this raises the possibility of downward adjustments in revenue and reduced profits for Korean semiconductor companies.

Hawkish opinions are strengthening within the Fed. Three Fed governors have issued a statement urging interest rate hikes, with figures like Beth Basset and others advocating for "strong hikes." This signals that the Fed has resumed discussions on rate increases and that macroeconomic indicators have begun to regain attention.

Department Head Moon Hong-cheol pointed out that there might be issues with the US August employment figures. In previous years, August was a season when many part-time and temporary workers quit. If the economy worsens, it is natural for people to continue working in situations of livelihood crisis. However, this year, temporary workers did not quit unusually. The problem is that the seasonal adjustment model set this as a positive. He ultimately raised the possibility that the employment figures were inflated.

Department Head Moon Hong-cheol concluded that the Fed's actual policy stance is "anti-Trump dependent." This means that policies are being pursued in a direction that checks Trump. He explained that despite Kevin Warsh being appointed by Trump, Fed officials are systematically resisting. Officially, they say they are "data dependent," but their actual actions are different, he criticized. He analyzed that organized resistance to Trump's attempts to undermine Fed independence is dictating current policy.

At that time, the primary targets of funds were emerging market bonds and some IT stocks. It is important that the current relative scale is about three times that of the past. This means the absolute amount is much larger. This is a warning that the current Ankeri liquidation could cause a greater shock than in the past.

Department Head Moon Hong-cheol specified the actual cause of the 1998 Ankeri liquidation. At that time, the US government implemented a policy of "Concerted Intervention," but the market ignored it. Instead, the yen weakened further. The real trigger was Russia's declaration of a moratorium. Two months after the Russian moratorium, the giant hedge fund LTCM collapsed because it incurred losses from arbitrage trading using Russian bonds. Ultimately, this means that Ankeri liquidation does not occur merely from market weakness; a credit crisis (default) is necessary.

He explained that no matter how interest rates are raised, the yen's weakening trend will continue. His logic is that if the Bank of Japan (BOJ) implements a big step (large increase) and the yen does not strengthen, then even trading in the opposite direction will not change the trend. He argues that exchange rate movements are much more sensitive to other factors (liquidity conditions, risk aversion, etc.) than to interest rate policy.

Department Head Moon Hong-cheol diagnosed that the cause of the rise in US long-term interest rates is not fiscal deterioration but a change in asset management structure. When interest rates rise, pension funds and insurance companies improve their financial soundness even if they do nothing. Since capital improves when interest rate differentials rise, they have no reason to buy long-term bonds. If pension funds and insurance companies, who are the only entities capable of purchasing long-term bonds, do not buy them, it becomes impossible to know where interest rates will stop. He argued that the talk of fiscal matters is merely an excuse to justify these changes, citing evidence that Japan has an almost balanced budget and Korea has almost no fiscal deficit.

Department Head Moon Hong-cheol believes it could reach that point given the current trend. This is because the current market is moving only by trend, not by logic or fundamentals. This means it moves up when it rises and down when it falls, without considering price merit. In such a situation, the trend becomes the most important criterion for judgment.

For current investment strategy, Department Head Moon Hong-cheol recommended the US S&P index, as big tech companies are currently in a resting state. Domestic semiconductors can only expect limited rebound due to high selling volume. The Kospi faces a selling wall above 2,700, and it will take time to break through it. Most importantly, a change in the Fed's attitude is crucial. He outlined a scenario where the Fed might change its stance after late October, suggesting a conservative approach until then, followed by a more aggressive stance.