September stock market: Even a 'sharp drop in interest rates' is not good news

Last July, SK Hynix's stock price was halved, causing a major shock to individual investors. Many investors concentrated their investments in Samsung Electronics and SK Hynix, and in cases where they invested with borrowed money, accounts were even liquidated due to forced selling. This led to a large-scale exodus of individual investors, and the overall trading volume in the stock market decreased, significantly dampening market vitality.

Despite foreign futures selling, the market is firmly holding the KOSPI 6,500 level. Although the market structure is thin enough to collapse even with a small amount of foreign futures selling, the 6,500 level is absolutely not breaking and is being supported. This appears to be due to listed companies' share buybacks contributing to bottom support, and it is interpreted as a sign that the market is forming a floor.

SK Hynix announced a clarification disclosure regarding Solidigm's pre-IPO of 5 trillion won. The term 'undetermined' in the disclosure is interpreted to mean that various competitiveness enhancement measures, including this agenda, are under review. So far, there has been no stock price decline due to this disclosure, and its impact on the market appears limited.

The push for a Nasdaq listing of Solidigm, a valuable subsidiary of SK Hynix, has sparked controversy over potential harm to existing shareholders' value. Concerns arise from the dilution of Solidigm shares and potential damage to existing shareholders due to duplicate listing. Already, within a complex governance structure involving SK-SK Square-SK Hynix-Solidigm, some argue there's insufficient justification for Hynix, which generates trillions of won in annual profits, to list a subsidiary for fundraising.

The Korea Exchange plans to conduct a review of parent-subsidiary duplicate listings. During this process, the exchange may request specific proof regarding the erosion of shareholder value. If the listing proceeds without shareholder protection measures, strong backlash and headwinds from shareholders are anticipated.

Solidigm, originally a subsidiary, has become a grandchild company through an intermediate holding company, making the governance structure even more complex. Concerns are being raised that the direct control of SK Hynix shareholders will be weakened as SK, SK Telecom, and SK Innovation share the holding company's stake. This could lead to share dilution issues.

Currently, the stock market shows strong downside rigidity at the KOSPI 6,500 level. Even if it temporarily falls below 6,500 during trading hours, it has recovered by the closing price three times. This suggests that the market floor is very solid, and the share buyback policy is expected to have a downside defense effect. Although the upside has only been touched once, it is analyzed that there is a high probability of touching it again.

The main reason the index has not collapsed despite continuous net selling from individuals, foreigners, and institutions is share buybacks by other corporations. These share buybacks are firmly supporting the index's downside and are why stock prices are not falling sharply even in a market with insufficient buying power.

Recently, while the semiconductor sector has stagnated, market warmth is spreading to other sectors. In August, secondary batteries surged significantly, and the cosmetics sector recorded a new high. Recently, robot-related stocks have shown movement, and food stocks have also subtly renewed highs in many cases. This is interpreted as a positive sign that the entire market is not in a slump but is finding vitality through sectoral rotation.

Key interest rate-related variables in the September stock market are employment figures and Micron's earnings announcement. Employment figures are expected to lead to a lower probability of an interest rate hike if they turn out worse than the forecast of 55,000. Additionally, Micron's earnings, to be announced in the last week of September, will be a crucial key to the potential spread of warmth in the memory semiconductor sector. The results of these two indicators are expected to significantly impact the September market trend.

The reason the stock market does not welcome a sharp drop in interest rates is that it could signal an economic recession. A sudden decline in interest rates could mean a deteriorating U.S. economy or big tech companies reducing investments. Such a situation would act as a negative factor that could collapse the domestic stock market, and the market considers preventing interest rate increases to maintain a stable environment more important than interest rate decreases.

The passage of the Clarity Act is being discussed for mid-September, which could play a crucial role in interest rate stability. If this bill passes, the stablecoin market will be activated, and a virtuous cycle will be formed where short-term government bonds must be purchased when stablecoins are issued. It is analyzed that instead of currently unpopular U.S. long-term bonds, stablecoin issuance would automatically lead to government bond purchases, contributing to interest rate defense. Former President Trump and the Treasury's demand for this bill's passage also appears to be directly linked to interest rate defense.

When investing in Samsung Electronics and SK Hynix, fundamental and shareholder return policies should be the criteria. To have confidence that stock prices will rise again from the current point, which is 30-40% below their peak, it is ultimately necessary to confirm these companies' profit growth. Data performance and big tech fundamentals remain solid. Additionally, the planned buyback and cancellation of approximately 100 trillion won in treasury shares will positively impact stock prices as it represents a return to shareholders.

The basic principle of stock investment is to invest where there is growth. The secondary battery industry is expected to see an earnings turnaround driven by the growth of the ESS (Energy Storage System) market. It is still viewed positively, with clear growth projected until next year. Additionally, construction stocks are gaining opportunities to create new revenue streams due to the demand for data center expansion. Domestic companies have extensive experience in data center construction and are analyzed to lead growth in this field.

A growth stock-focused portfolio is recommended. In particular, attention should be paid to companies that are currently generating good profits and can secure definite orders in the short term, rather than just those expected to earn a lot of money in the future. The construction sector, for example, offers clear earnings verification, and the nuclear power industry also holds steady expectations for orders.

The battery sector is expected to rank overwhelmingly first in terms of projected operating profit growth rate by industry next year. Despite a temporary slowdown in the electric vehicle market, the growth of the ESS (Energy Storage System) market is expected to offset this and drive earnings. SK On's large-scale U.S. order case demonstrates the strong competitiveness of Korean battery companies, and based on such orders, the battery sector's growth is expected to continue.

With Chinese manufacturers currently restricted from entering the U.S. market and Japan's Panasonic showing a passive response, the unique position of Korean companies in the global battery supply chain is highlighted. As attempts at internal battery expansion in Europe and the U.S. have failed, analysis suggests that only Korea and China remain as viable battery producing nations. This indicates that Korean battery companies will play an even more crucial role in the global market going forward.

Analysis suggests that times of severe market doubt and anxiety are precisely the right time for fundamental-based investing. If there are no fundamental issues with the market, it is important to approach it calmly through mind control rather than giving up during a downturn. Particularly, a strategy of staggered purchases until the FMC (Federal Open Market Committee) meeting is recommended for market 대응.