Stocks Fall on Rate Surge…Semiconductor Exports Hit Record High

On Friday, the KOSPI closed at 6,909 points, down 124 points (1.76%) from the previous day, breaking below the 7,000-point mark. This result fell short of market expectations. Major market capitalization stocks, including Samsung Electronics, Hynix, and secondary battery stocks, generally showed weakness.

While 368 stocks rose, 473 stocks fell, though there was some recovery in losses towards the end of the trading session.

The KOSDAQ index also closed at 820.64 points, down 16.28 points (1.95%) from the previous day. Similar to the KOSPI, the decline was prominent.

With 998 stocks falling compared to only 596 rising, the overall market showed a strong bearish sentiment, with a notable decline observed in equipment and secondary battery stocks.

Along with this, 3-year government bond yields recorded 4.01% and 2-year yields 3.92%, showing an overall clear upward trend in interest rates.

This is interpreted to mean that market participants are anticipating at least one or two more rate hikes from the Bank of Korea and are pre-emptively pricing them in.

Amidst rising interest rates, the construction sector showed strength, driven by news of orders for small and medium-sized construction companies and GS E&C. This is also linked to the increasing demand for AI infrastructure construction.

The insurance sector showed strength on expectations that bond operating yields would improve with rising interest rates. As the domestic 10-year government bond yield reached 4.5%, it is expected to positively impact insurers' long-term bond operating yield acquisition.

In terms of thematic trends, MLCC (Multi-Layer Ceramic Capacitor) related stocks showed strength. News emerged that MLCC supply shortages could cause disruptions in Energy Storage System (ESS) supply.

Quantum computing related stocks also gained attention, which is analyzed to be influenced by NVIDIA CEO Jensen Huang's remarks emphasizing the importance of cybersecurity in the AI era. Meanwhile, individual investors showed a short-term trading tendency, buying on dips and selling on rallies.

The U.S. bond market showed peculiar movements ahead of tonight's CPI (Consumer Price Index) release. Short-term bond yields rose, while long-term bond yields fell compared to the morning.

This suggests that market concerns about a potentially high CPI reading are driving short-term yield increases. Investors anticipate that the CPI results will significantly influence the Federal Reserve's future interest rate policy direction.

Analysis suggests that the sluggish real estate market could act as a factor in moderating inflation.

The market maintains cautious optimism about the CPI results, as a decline in housing costs could reduce overall inflationary pressure, even if other price indicators show high readings.

This level is lower than the prevailing rate of 5.36% at the time, evaluated as meeting market expectations.

The issuance amount was $2 billion, and the bid-to-cover ratio was 2.61 times, showing an average level. These auction results are interpreted as an important indicator for gauging the stability of the bond market.

Goldman Sachs warned that today's CPI release would significantly influence the Federal Reserve's interest rate decision next week. It pointed out that if inflation indicators warrant action but the Fed freezes rates, it could cause significant turmoil in the bond market.

This expresses concern that such a move could be perceived as a policy error by the Fed, potentially leading to a greater market shock than a rate hike.

Currently, the U.S. 10-year government bond yield exceeds 4.9%, while China's 10-year government bond yield remains at 1.68%.

This interest rate inversion phenomenon is intertwined with changes in the economic structures of both countries and the reorganization of global supply chains, suggesting that the U.S. must raise interest rates to secure funding.

The enormous demand for funds required for AI data center construction is rapidly depleting the cash reserves of hyperscalers. Big tech companies, including Meta, are investing massive capital as they focus on expanding AI infrastructure.

These hyperscalers issuing bonds has created a situation where they directly compete with the U.S. Treasury market. Companies now have to offer higher interest rates than Treasury bonds to raise capital, which ultimately acts as upward pressure on U.S. Treasury yields.

The competition among companies to secure funds for data center construction is becoming a factor that is driving up overall interest rates in the bond market.

He pointed out that the industry's computing power is still extremely insufficient.

OpenAI is using cash to proactively bear future costs between 2030 and 2035, and current profits also need to be invested in these large-scale investments, he explained.

Notably, semiconductor exports, at $16.5 billion, surged significantly compared to the previous month, driving the overall export boom.

Average daily exports also generally increased, confirming a positive export sentiment. This is interpreted as a result of a significant increase in high-bandwidth memory (HBM) exports.

NVIDIA CEO Jensen Huang emphasized that AI-powered security solutions are essential to counter increasing attack threats due to advanced AI technology. He stated that the next important role for AI would be found in cybersecurity.

These remarks suggest new market opportunities where GPU demand can be continuously driven by the expansion of the AI ecosystem. As AI technology advances, the importance of security grows, and the related industry is expected to expand.

Including its existing 300,000 wafers, it will have a massive production base of 600,000 wafers.

CXMT's aggressive expansion of production capacity raises concerns that it could depress DDR5 (5th generation Double Data Rate) memory margins when it becomes fully operational between 2028 and 2029.

As major semiconductor companies like Samsung Electronics and Hynix are also competing to expand production, future semiconductor market oversupply and intensified price competition are expected.

The surging demand in the Energy Storage System (ESS) market is exacerbating the shortage of MLCCs (Multi-Layer Ceramic Capacitors), a core component. The lack of MLCCs needed for ESS device production is causing supply disruptions.

Demand for high-performance MLCCs for AI data centers and electric vehicles is also surging, leading to a comprehensive supply crunch. This raises the possibility of price increases by MLCC manufacturers, which is expected to impact the market.

This is interpreted as part of China's strategy to rapidly lead the electric vehicle market by accelerating the commercialization of advanced autonomous driving.

Such rapid changes have significant implications for the Korean automotive industry. Korea also needs to accelerate its electric vehicle transition and step up autonomous driving technology development to keep pace with changes in the Chinese market.

This news is expected to act as a positive upward driver for domestic construction stocks across the board.