US Treasury Yields Break 5%, What's the Market Impact?

Among market experts who, until recently, predicted an interest rate freeze just one to two weeks ago, the opinion that an interest rate hike is inevitable has become dominant. External variables, such as rapidly changing oil prices, are analyzed to have a significant impact on the decision of the US Federal Open Market Committee (FOMC). Expert Park Ji-hoon commented, “Until one or two weeks ago, I was somewhat predicting an interest rate freeze, but now I can only say that an increase is an unavoidable situation.”

With the negligible buyback effect due to the rejection of the Clarity Act, there are no suitable means to curb oil prices, leading to observations that a new breakthrough will be sought at the summit.

In this scenario, Japan's capacity and environment for purchasing government bonds would deteriorate, making a rate hike unavoidable to stabilize the financial market. Expert Park Ji-hoon stated, “If Japan also raises rates by 25bp, just like the US, Japan will not have the capacity or environment to purchase government bonds. Because they both go up.”

Expert Park Ji-hoon explained, “What is the situation at the lower end of the 2,600-point range? Even if a massive negative event approaches, the range of volatility will decrease.” It is expected that even if a major negative event occurs, downside rigidity will be secured rather than further declines.

Amidst these interest rate variables, a strategic debate surrounding growth stock investments is anticipated. Investors are seeking alternatives that can minimize volatility and pursue stable returns.

At the upcoming US-China summit, the US is likely to ask China to curb crude oil imports and request a flexible response to changes in the energy replacement system. In return, the US is expected to offer industrial trade packages, such as the establishment of factories in China. Expert Park Ji-hoon predicted, “Wouldn't the US say, 'Please refrain from importing a little'? But if you do that for us, I might have some gift packages prepared.”

A 25bp interest rate hike by the US Federal Reserve (Fed) this week is widely anticipated to be inevitable. Expert Heo Jae-mu emphasized the importance of the supercore inflation indicator, stating, “Many people are saying that a 25bp rate hike will be unavoidable this week.”

The temporary increase in communication costs included in the Consumer Price Index (CPI) in August is identified as a one-time factor, and an analysis suggests that the Fed can expect a change in the Personal Consumption Expenditures (PCE) inflation calculation method by removing this factor.

With the possibility of a softened rate hike stance next year indicated in the dot plot, there is an observation that the market may have time to observe the effects of rate hikes for a considerable period.

As the exchange rate rises to the 1360 won level, export-oriented sectors, especially semiconductors, are expected to benefit. With foreign investors' perspectives beginning to change, October is projected to be the point when confidence in the mid- to long-term earnings of major semiconductor companies like Samsung Electronics and Hynix will recover. Expert Heo Jae-mu emphasized the need for an attitude that prioritizes mid-term earnings trends over short-term external variables.

He stated, “Foreign investors, managers' thoughts have started to change a little. I see October as the time when noise about tech earnings will actually turn into trust.”

Recently, stocks related to post-processing (testing) have shown robust price movements. As the Onyang fab transitions from general-purpose DRAM to High Bandwidth Memory (HBM4) processes, demand for test equipment is expected to surge significantly. The HBM4 process involves two to three times more steps than conventional general-purpose DRAM, further highlighting the importance of post-processing equipment like burn-in testers.

In particular, HBM4 is a core component of artificial intelligence (AI) semiconductors, and its increasing demand is expected to lead to improved performance for related equipment companies. Expert Heo Jae-mu explained, “When the fab in Onyang transitions to HBM4, the process steps increase by two to three times compared to general-purpose DRAM. Then, test equipment is needed.”

This trend, coupled with structural changes in the semiconductor industry, enhances the growth potential of post-processing test equipment manufacturers. These companies are expected to expand their market share based on their technological capabilities and achieve continuous earnings growth. Amid general expectations for a semiconductor industry recovery in the second half of the year, the growth in the post-processing sector is projected to become even more prominent.

The explosive growth of the artificial intelligence (AI) industry directly leads to power and semiconductor shortages. Noise about some infrastructure investment companies slowing down is assessed as a temporary phenomenon, and from the perspective of the big wave of industrial change, the long-term upward trend of these sectors is expected to continue. Expert Heo Jae-mu emphasized the core values, stating, “Ultimately, it's about power; ultimately, it's a power shortage; and ultimately, it's about semiconductors.”

Therefore, stocks related to energy, fuel cells, and communication equipment (CPO) are still considered promising. As these are essential elements for expanding AI infrastructure, investment in these areas is deemed effective from a long-term perspective.

This pricing appears to consider both price competitiveness compared to existing Galaxy foldables and consumers' psychological resistance levels. Expert Yeo Do-eun posed a question about consumer reactions, saying, “Let's say it's 3.25 million won. Then it's a steal. Do you think you should buy it at this price?”

Apple is reportedly aiming for annual sales of 7.5 million to 8 million units for its foldable iPhone. Accordingly, an analysis suggests that attention should be paid to companies within Apple's value chain, such as hinge manufacturers.

The secondary battery industry is identified as a prime example of such an area. Expert Heo Jae-mu emphasized, “You might need to look at sectors in the anti-Trump camp. And the representative one that we need to keep watching is secondary batteries.”

In particular, Samsung SDI was recommended as a Top Pick, based on the growth potential of its Energy Storage Systems (ESS) and cylindrical batteries. With upward revisions in operating profit consensus for 2026-2027, an improvement in growth rate is confirmed, narrowing the gap with LG Energy Solution.

The steel sector's investment appeal is highlighted by recent easing raw material burdens and improving spread margins. Hyundai Steel, in particular, is analyzed to be significantly undervalued with a Price-to-Book Ratio (PBR) of 0.2. Expert Heo Jae-mu emphasized its value as a low-PBR stock, mentioning, “Hyundai Steel's appeal is that its PBR is only 0.2.”

In a high-interest rate environment, more investors may seek low-PBR stocks, so it's suggested to also pay attention to POSCO Holdings and SeAH Besteel in addition to Hyundai Steel. Improved investor sentiment is expected to align with structural changes in the steel industry and expectations for improved performance.

It has been confirmed in the market that Haesung DS's automotive lead frame sales account for 60-70% and are currently operating at full capacity. The robustness of its core business was proven through company visits and conference calls. Expert Park Ji-hoon stated, “It was confirmed in the market through company visits or conference calls that the automotive lead frames are operating at full capacity.”

Additionally, the improving operating profit margin of the substrate business since the third quarter is also positive. There are signs of continuous accumulation by foreign investors, and the possibility of an upward revision in long-term consensus is raised. Joint growth of both the core business and new businesses is anticipated.

Global peer groups like Panasonic have already started raising prices, and consequently, domestic MLCC companies are in a situation where they must increase prices by more than 10%, according to analysis. Expert Park Ji-hoon explained, “Global peer groups have started raising prices now. Panasonic has also started raising prices, and domestic MLCC companies have no choice but to raise prices by more than 10%.”

Demand-side companies are likely to accept these price increases, which is expected to directly translate into earnings for domestic companies. MLCCs are essential components in various electronic devices, and with overall demand increasing, price hikes are anticipated to be even more feasible.

Regarding shipbuilding investment strategy, an analysis suggests that HD Hyundai Heavy Industries needs a double bottom confirmation process. Expert Park Ji-hoon stated, “HD Hyundai Heavy Industries needs a process to confirm a double bottom. But once a double bottom appears, I believe the stock price's downside is secured.” Momentum from power generation engines for data centers and SMRs (Small Modular Reactors) also acts as a positive factor.

In particular, as LNG (Liquefied Natural Gas) vessel prices continue to rise, the company is evaluated as one capable of qualitative growth. This signifies a strengthening of competitiveness in the high-value-added vessel sector along with the overall recovery of the shipbuilding industry. The expansion of the LNG vessel market is expected to be a long-term growth driver for HD Hyundai Heavy Industries.

Investment in overall energy-related stocks is also considered important. Even in a high-interest rate environment, the major trend of eco-friendly energy transition will continue, so attention should be paid to the growth potential of related companies. This can serve as an opportunity to generate stable returns from a long-term perspective.

Expert Park Ji-hoon emphasized that shipbuilding stocks cannot be left out, and once HD Hyundai Heavy Industries' downside is secured, it will show a robust trend. The high prices of LNG vessels were particularly presented as a crucial basis for qualitative growth.