“No Solution” if Rates Rise Next Year, Warns Expert

The market has already priced in interest rate hikes. Some analysts suggest that if interest rates are frozen, the market might react with confusion. For a rate freeze to act as a positive catalyst, the Federal Reserve (Fed) would need to issue optimistic and confident comments on the economy.

The market is currently pricing in and somewhat preparing for additional interest rate hikes. However, concerns are rising that if the Fed adopts a wait-and-see approach, fails to curb the rise in international interest rates, and then belatedly rushes to hike rates, the market could crash. This risk could materialize if the hike exceeds what the market has already anticipated.

The U.S. 10-year Treasury yield temporarily surged above 5.5% during intraday trading. While there have been intraday highs before, this is the first time it has closed above 5% or typed above 5.5%. This is identified as a major cause of the current index weakness, indicating increasing interest rate burden on the market.

BNK Securities released a report lowering its target price for Samsung Electronics to 270,000 won and SK Hynix to 140,000 won. This unusually low target price sparked considerable debate among investors. The underlying issue is not merely the target price figures themselves, but rather the current uncertainty surrounding the semiconductor industry in the market.

BlackRock, the world's largest asset manager, has once again upgraded its investment recommendation for Korean stocks to 'overweight.' This upgrade comes three months after it downgraded its recommendation to 'neutral' after suggesting an overweight position in June. BlackRock believes that market risks have somewhat dissipated through deleveraging in July and August. In particular, Korea's AI semiconductor competitiveness and lower valuations compared to other Asian markets were cited as attractive features for investing in Korean stocks. This could act as a positive signal for the domestic stock market. However, such investments by foreign institutions should be interpreted from a medium-to-long-term perspective rather than short-term market trends.

The current share buyback program is expected to conclude in early October. Opinions are divided between optimism and pessimism regarding its impact on the market after the buyback ends. The supply and demand trends of foreign and institutional investors before and after the conclusion are expected to be critical variables. CEO Park Byung-chang stated that he sees a higher probability of the market moving upwards after the share buyback ends.

When the stock index is below the 11-day moving average, a conservative approach is recommended. If this support level breaks, the market could plunge. Investors considering buying stocks should consider a strategy of fractional purchasing, buying in smaller increments of 100 shares multiple times, rather than a large lump sum. This is suggested as a way to diversify risk and seek opportunities even in a declining market.

If an interest rate hike is implemented this time, there is a high possibility of an additional hike in December. A greater concern is if the Federal Open Market Committee (FOMC) dot plot for next year indicates higher interest rates than this year. This would be interpreted as a signal of continued interest rate hikes next year, potentially causing a severe shock to the market. CEO Park Byung-chang warned that if this scenario materializes, there would be 'no solution' for the market, analyzing that the market is currently being driven towards rate hikes.

Recent intelligence suggests secret meetings of military commanders from various countries in the Middle East. However, with the U.S. presidential election approaching, it is unlikely that the results of these meetings will be disclosed before the election. Instead, significant announcements related to Middle East risks are expected after the election. This suggests the possibility of the Middle East situation escalating into a state of war within a few months.

The U.S. Treasury Secretary acknowledged artificial intelligence (AI) as a key technology for productivity enhancement, while also emphasizing AI's safety and the need for regulation. She specifically opposed granting broad immunity to AI companies, asserting that developers and companies should bear legal responsibility for the behavior of AI models and any resulting harm. This suggests ongoing discussions between the U.S. government and AI companies regarding AI regulation.

The U.S. Clarity Act, a crypto market structure bill, failed to be introduced in the Senate. This increased uncertainty about the bill's passage within the year, leading to a decline in related stocks yesterday. For the Trump administration, the introduction of stablecoin regulation is urgent, and market expectations for state-regulated stablecoins still exist. The delay in the bill's passage could negatively impact the virtual asset market.

The core of the letter requested the board to resolve to purchase and cancel preferred shares when allocating shareholder return resources in 2026. They asked for preferred shares to be intensively purchased by December this year and immediately cancelled. This differs from SK Networks' share cancellation case, as Samsung Electronics' share buybacks are primarily used for employee compensation and are not cancelled. The limitations on common stock cancellation due to Samsung Life Insurance's and Samsung Fire & Marine Insurance's financial holding company structure are also interpreted as a background for this demand.

Concerns were raised about the possibility of a sharp rise in the price of Samsung Electronics preferred shares due to their limited circulating supply during the buyback process. There have been instances in the past where preferred shares traded significantly higher than common shares due to 'schemes.' However, CEO Park Byung-chang argued that since the purpose of the share buyback is clear and not a mandatory obligation, it is possible to control the price without artificially inflating it during the purchase. This is interpreted as a counterargument to concerns about volatility in circulating supply.

With the U.S. stock market's simultaneous expiration day scheduled for this Friday (as of the 16th), vigilance against increased market volatility is growing. Investors need to approach the market with a more conservative perspective. In particular, attention is focused on stocks related to the announcement of U.S. investments scheduled for the 18th. It remains to be seen whether the U.S. investment announcement after the simultaneous expiration day will provide new momentum to the market.