Global Risk Appetite Recovers, Defending 7,000 Level

Stable US Treasury yields, restored Fed confidence, and an upward trend in big tech company profits provide grounds for defending the 7,000 level.

The stabilization of US Treasury yields and the market's restored confidence in the Federal Reserve's independence are driving up US Treasury prices, contributing to financial market stability.

US big tech companies are reporting robust earnings and upward revisions to profit estimates, while a stronger won is expected to positively impact foreign capital inflow.

The theoretical index decline due to the ex-dividend date is expected to be about 1.5% to 2%, with an estimated dividend payout of approximately 80 trillion won.

It is believed that concerns about the ex-dividend date have already been priced into the market, and the long-term upward trend is expected to remain unchanged.

Although the 7,000 level briefly broke, Research Fellow Lee Ji-eun diagnosed that the market is once again betting on AI's scalability as AI-related CAPEX investment continues.

Micron's earnings release is expected to be a turning point for betting on AI growth, and the possibility of falling international oil prices offsets concerns about interest rate hikes.

With market sentiment focused on AI growth, the possibility of a 7,000 level recovery is also being anticipated.

Lee Kyung-soo, Chief Research Fellow at Hana Financial Investment, mentioned that there have been two instances in the past where term premiums decreased amidst benchmark interest rate increases.

Rising interest rates typically increase term premiums due to economic burden, but the exceptional reduction is interpreted as reflecting the market's risk-on sentiment.

Expectations for new technologies like the internet, cloud, and AI, i.e., corporate growth, play a greater role than interest rates themselves. During periods of paradigm shift in growth, stock prices have risen alongside higher interest rates.

Unless there are unforeseen crises such as geopolitical risks, the current interest rate hike trend is considered a favorable environment under the AI ecosystem.

When term premiums decrease sharply, small-cap stocks have generally shown strength. However, given the current high interest rate environment, a concurrent rise in both large and small-cap stocks is expected.

Stocks with high credit margin balances can be interpreted as a 'smart money' indicator, showing the market's risk appetite.

In a high interest rate environment, the importance of ROE is emphasized over undervaluation as an investment indicator.

The strength of oversold stocks during term premium reduction is due to the short-covering effect from foreign capital inflow. A strategy of selecting stocks that are excessively oversold in the short term and have high ROE, then investing medium-term, is favorable for performance.

Individual investors have also increased their short-term trading of small-cap stocks, and the market appears to be returning to a theme-driven trend. The analysis suggests that during share repurchase periods, small-cap stocks moved more lightly than Samsung Electronics and SK Hynix due to supply and demand factors.

Individual investors are also increasing their pattern of short-term trading in small-cap stocks, and the market appears to be returning to a small-cap and theme-focused market, moving away from the past large-cap trend.

Investors with time to spare can evaluate the current market as a manageable period.

The key for future trends is whether Micron will confirm price increases through its upcoming earnings announcement amidst supply constraints. If Micron provides positive guidance, the lowered expectations could actually serve as an opportunity for the market.

If Micron provides positive guidance in its earnings, the market is expected to continue its growth phase. Currently, it's a period manageable for investors with time to spare, and lowered earnings expectations are interpreted as a positive signal for investors.

Overall earnings expectations for Q3 are not as high as Q1 and Q2, but next year's earnings forecasts are being revised upwards.

Consensus is rising for the oil refining, construction, secondary battery, shipbuilding, and machinery sectors. In particular, attention is needed for stocks such as Samsung Electro-Mechanics, Samsung SDI, Samsung Fire & Marine Insurance, SK Innovation, and S-Oil.

The oil refining sector expects positive earnings due to diesel supply shortages and expectations for wider refining margins.

As risk appetite increases, it is necessary to select stocks with high trading volume relative to market capitalization or those that have experienced excessive price drops. Attention should be paid to stocks with high ROE and upward consensus revisions.

Portfolio management requires broadening the range of stocks by combining short-term trading strategies based on research. Systematic stock selection based on indicators must be supported.