Domestic Market Rebounds, Yen Weakens Despite Japan's Rate Hike

On this day, 407 stocks rose while 463 declined, with market capitalization leaders primarily driving the market. Specifically, semiconductor, AI data center, and power-related stocks showed strong performance.

The KOSDAQ market recorded an increase of 4.94 points, or 0.60%, from the previous day, reaching 827.12. This was a more limited increase compared to the main exchange market. While semiconductor equipment stocks led the gains, the underperformance of secondary battery and bio sectors curbed the overall rise.

Notably, the decline in long-term bond yields was significant. On this day, the 10-year yield fell by 2.5 basis points from the previous trading day, recording 4.46%, breaking the 4.5% line.

The yen-dollar exchange rate surpassed 157 yen, indicating a market situation where Japan's rate hike did not lead to a stronger yen.

Foreign investors concentrated their buying in the electrical and electronics sector. Not only foreign investors, but also securities firms, trusts, investment trusts, and other corporations intensively purchased IT semiconductor-related stocks such as Samsung Electronics and Hynix. This was a major factor supporting the strength of the IT and semiconductor sectors in the domestic stock market.

This movement indicated individual investors' tendency to seek short-term profits, with individual selling absorbed by foreign investors, institutions, and other corporations including Samsung Electronics and Hynix.

In the policy committee, 7 members voted for the hike, and 2 voted for a freeze. Committee members Asada and Sado, who advocated for a freeze, cited sluggish economic conditions and insufficient acceleration of inflation as reasons.

The Bank of Japan confirmed in its statement that underlying inflation is approaching 2% and financial conditions remain accommodative. Accordingly, it clearly stated its policy to continue raising the policy rate in line with changes in economic, price, and financial conditions. Specifically, the statement included the phrase 'Continue to raise the policy interest rate,' suggesting the possibility of sustained future rate hikes.

The Bank of Japan assessed that the economy and prices are largely consistent with the basic scenario of its July outlook. It stated that real interest rates remain low, especially in the short-to-medium term, and accommodative financial conditions will be maintained even after this rate hike to support economic activity. This suggests a gradual approach rather than a sharp, immediate increase.

As Japan officially joins the rate hike trend, interest rates are rising globally. Japan's interest rate has reached 1.25%, a 31-year high. However, according to Goldman Sachs Research, while U.S. 10-year Treasury yields have risen significantly, companies' real interest expense burdens have not yet increased proportionally. This is due to companies having previously borrowed at lower rates, and the effect of tightening typically appears with a lag of about six months.

Despite Japan's interest rate hike, Berkshire Hathaway's investments in Japan are expected to continue. According to Bloomberg, Berkshire Hathaway is considering further increasing its stakes in Japan's five major trading companies—Mitsubishi, Mitsui, Sumitomo, Marubeni, and Itochu—from 10% to over 15% each. This reflects Warren Buffett's long-term investment perspective on the Japanese market.

They pointed out that the returns over the past 20 years have been double the historical average, presenting the 'mean reversion' theory as a key point. This high-performing pension fund is diversifying its portfolio, which has a high concentration of large tech stocks like Nvidia, Apple, and Microsoft.

BofA analyzed that the current price-to-earnings ratio (PER) of the S&P 500 stands at 32 times, and such a decline would be inevitable if it were to revert to its historical average. This is interpreted as a warning about the possibility of long-term growth deceleration in the U.S. stock market.

News recently emerged that Amazon is continuing long-term supply contracts for emergency generators for data centers, signing large-scale power equipment deals. This is seen as an example of the sustained growth of AI-related infrastructure investment, separate from the overall market's potential for a trading range.

This is attributed to the increased expectation of investment in power infrastructure, which is essential for data center construction.

They enter the market at much lower prices than existing products, causing competitors to fail. After strengthening market dominance, they stabilize or even raise prices to generate excess profits.

This is interpreted as China's transition from its traditional role as the 'world's factory' to a global industrial operating system based on AI automation. China is pushing for AI-driven innovation across all industries, aiming for autonomous application systems beyond mere facility construction.

Citigroup projected in its report that Korea's growth rate will maintain the 3% range annually. It specifically anticipated that Korea's semiconductor-led growth would continue longer than expected, predicting that the domestic real GDP would exceed 3% until 2028. This forecast is higher than the Bank of Korea's projections, with growth rates of 3.7% in 2026, 3.1% in 2027, and 3.0% in 2028.