Sell-off Triggered by US Military Base Attack… Why Did the Market Fluctuate?

Following this, former President Donald Trump's statement that he would not stand idly by if there was retaliation acted as real fear, not just a difference in news interpretation, fueling a short-term sell-off. Lee Kwon-hee explained, "The US air base was attacked by Iran. It's a common occurrence, but why were people surprised? I think it was because of what President Trump said. He basically put out a warning, saying, 'If you retaliate again, I won't stand still.' So, I think there was a moment of fear."

Analysis suggests that Trump's remarks had a greater impact than the attack on the US military base itself. Investors showed a tendency to overreact to the news based on past experiences.

Ultimately, this is assessed as a short-term panic selling phenomenon caused by market participants' excessive interpretation of the news.

As mechanical selling volume poured out, rather than from specific entities, the stock index decline accelerated. Lee Kwon-hee stated, "Someone, yes. Everyone was surprised, but I think this was due to program-linked stocks being sold by machines, not individuals. When foreigners throw out futures like this, the program buying and selling volumes that move with the KOSPI index also pour out. I think that's the correct way to understand it."

This phenomenon reflects the market characteristic where spot and futures move in tandem. Sudden selling pressure in the futures market triggered program selling in the spot market, driving an overall downturn.

As a result, automated trading by programs, rather than selling by individual investors, is identified as the main reason for the increased market decline.

In the current market, memory semiconductor stocks like Samsung Electronics and Hynix are tending to be de-prioritized. As expectations for interest rate cuts weaken and concerns about high interest rates becoming entrenched grow, financial stocks continue to show strength. Kim Jang-ryeol commented, "Interest rates are still high, so even if the US doesn't raise rates, Korea's rates are high, so financial stocks have remained strong. Even if semiconductor AI rebounds, isn't the recent consensus to at least adopt a barbell strategy for finance and AI semiconductors?"

Accordingly, a 'barbell portfolio' strategy, combining both semiconductor (AI) and financial sectors, is gaining attention as an investment approach. This is an attempt to respond to market volatility by appropriately combining growth stocks and value stocks, aggressive and defensive investments.

In a situation where uncertainty in US interest rate policy persists, it is important to build a balanced portfolio by pursuing stable returns from financial stocks and investing in AI semiconductors, which are future growth engines.

This strategy is interpreted as a move to hedge market uncertainty and simultaneously capture growth opportunities. In particular, the attractiveness of financial stocks, which can maintain strength depending on changes in the interest rate environment, is highlighted.

While US big tech companies directly benefit from AI, Korean memory semiconductor companies like Samsung Electronics and Hynix are being de-prioritized despite relatively lower valuations. Kim Jang-ryeol explained, "US semiconductor stocks and Korean semiconductor stocks are not treated equally. It's not about AI exposure or semiconductor fundamental issues; they've been pushed down in priority. That's clear, and it will take until Q3 earnings for that to be resolved, so until then, they're not a priority."

This analysis suggests that Korean memory semiconductors are being de-prioritized in the market, rather than facing issues with AI exposure or fundamentals. It is observed that a supply-demand imbalance is likely to persist until earnings guidance or clear momentum is confirmed.

Investors are watching to see if a substantial change emerges with the Q3 earnings announcements of Korean memory semiconductor companies. Until then, difficulties in terms of supply and demand may continue.

Consequently, it is judged that Korean semiconductors are showing a differentiated trend, being pushed down in market supply-demand and priority rather than facing AI fundamental issues.

This is based on the judgment that the AI sector has been overheated in the short term and risk management is necessary due to changing market conditions. The center head mentioned, "A month ago, I said, 'I'm sorry if I was wrong, but about a month and a half ago, what did I say? AI group, including AI semiconductors, half or 30-40%.'"

Instead, an increase in the proportion of financial stocks is suggested, a strategy that considers the market size and stability of the financial sector. This is supported by the analysis that financial stocks can expect relatively stable returns due to the high likelihood of interest rates remaining at elevated levels.

Since short-term trading is very difficult in the current market, it is wise to rebalance portfolios to reduce risk and move to stable sectors.

This strategy is proposed as a way to defend returns and ensure stability during periods of high market uncertainty.

Today, substrate-related stocks generally experienced a decline. This appears to be due to profit-taking by investors in substrate stocks that have recently risen significantly. Lee Kwon-hee explained, "Today, substrate stocks fell quite a bit. Overall, yes. This also seems to be a concept of profit realization. They've risen quite a lot recently."

Analysis also suggests that concerns about Korea Circuit's performance contributed to the synchronized decline. Negative news about a specific stock is interpreted as dampening investor sentiment across the entire sector.

Meanwhile, the cosmetics sector has also entered a period of correction, with a perception of short-term peaks. Cosmetics stocks, which had recently shown an upward trend, are also undergoing adjustment due to profit-taking.

Despite Solidigm's IPO (Initial Public Offering) schedule not yet being confirmed, market movements related to it are being observed. Investor interest is growing, with movements such as pre-listing of ETFs in the US. The center head commented, "The Solidigm IPO schedule hasn't been released, and the IPO schedule isn't even set yet, but there's some movement. The premise is that it will have value."

However, caution is needed against the market over-interpreting the situation while the IPO schedule remains unconfirmed. This is because short-term supply and demand factors can lead to increased volatility, irrespective of actual value.

From a long-term perspective, a positive impact can be expected depending on Solidigm's corporate fundamentals. However, in the short term, it is analyzed that caution is needed regarding an overheated situation accompanied by uncertainty.

This is because it is an extension of existing policy rather than a new issue. The center head explained, "I think this itself will have a limited short-term impact. Nothing specific has come out yet. Right, right. Nothing."

Analysis suggests that in the absence of specific details, the short-term impact on market supply and demand will not be significant. The US has already been pursuing various policies to expand domestic semiconductor production.

However, there are also concerns about medium-to-long-term risks if investments beyond 2030 coincide with the semiconductor cycle. From a long-term perspective, risks related to supply chain reorganization cannot be excluded.

In conclusion, at the current stage, the impact of US semiconductor tariff pressure on the market is minimal, and a wait-and-see approach should be maintained until more specific policy announcements are made.

More than 2 million shares have been shorted this month alone, indicating a significant cumulative volume. The center head stated, "There are a lot of short positions, and cumulatively, there's quite a bit. 2 million shares this month alone."

Furthermore, the overall weakness in top KOSDAQ stocks and delays in government policy momentum have also negatively affected Alteogen's share price. A complex combination of factors, including a contraction in investment sentiment across the entire bio sector, appears to be at play.

However, a large accumulation of short positions also suggests the possibility of future short covering. If the stock price falls below a certain level, short sellers buy back shares to lock in profits, which can cause the stock price to rise.

Therefore, even if the current weakness persists, the possibility of a rebound due to short covering remains open.

Around 1:11 PM, news reports that Iran attacked a US military base in Kuwait led to a sharp drop in the KOSPI index. A panic situation occurred where declines led to further declines, with market participants unaware of the exact cause. Jang Ho-jin explained, "The market suddenly fluctuated when news spread that Iran attacked a US military base in Kuwait."

However, as the veracity and impact of the news were confirmed, the market quickly rebounded. The absence of actual war-related fear indicators, such as a sharp rise in oil prices, appeared to alleviate investor anxiety.

Consequently, this sharp decline was revealed to be a temporary sell-off driven by fear without accurate information. The market reacted rationally and recovered after assessing the news's actual impact.

This phenomenon demonstrates that excessive reactions to unconfirmed news or rumors can occur in the market. Therefore, investors need to carefully assess the factual basis and actual impact of news.

The absence of actual war-related fear indicators like a sharp rise in oil prices implies that the market interpreted the news as a short-term happening.

Jang Ho-jin explained, "I think the possibility of yen carry unwinding is very low. Even if interest rates are raised, funds will not flow into Japan."

This is because Japan's low growth and the absence of a strong yen provide insufficient incentive for foreign funds to flow into Japan, even if interest rates are raised. Yen carry trades involve borrowing low-interest yen to invest in higher-yield assets, and even if the interest rate differential narrows, capital repatriation may not be active if the Japanese market is not attractive enough.

Furthermore, the structural issue of the Japanese government, with its high debt ratio, making it difficult to implement sharp interest rate hikes, is another reason for the low probability of yen carry unwinding.

In conclusion, the prevailing analysis is that Japan's interest rate hike will have a limited impact on global financial markets.

He mentioned easing inflation trends and reduced tariff impacts, challenging existing perceptions of the Fed's monetary policy direction. Jang Ho-jin commented, "John Williams had previously made neutral-to-somewhat hawkish remarks. But suddenly, he made very dovish remarks yesterday."

This highlights the differing judgments among Fed officials regarding the spread of service inflation. While some officials believe service price increases remain strong, President Williams believes they will gradually ease.

Such disagreements within the Fed can heighten market uncertainty about the future path of interest rate hikes. The market is awaiting consistent signals regarding the Fed's monetary policy direction.

Consequently, President Williams' change in stance suggests that the Fed's monetary policy stance remains fluid and could unfold in a direction different from market expectations depending on the circumstances.

September is projected to be a final hurdle for liquidity, mainly due to the replenishment of the Treasury General Account (TGA). Compounding this, unstable external factors such as rising oil prices could increase market volatility. Jang Ho-jin explained, "I see September as the final hurdle for liquidity, and as I've repeatedly mentioned, oil prices are not good. And looking at the schedule, with the Anthropic IPO ahead, we experienced liquidity being sucked up by SpaceX in June, so liquidity isn't abundant, but a place to draw liquidity has emerged."

Particular caution is needed regarding a potential concentration of demand due to the planned IPO of AI startup Anthropic. As seen with SpaceX in June, large IPOs can quickly absorb market liquidity, causing capital outflow from other sectors.

Therefore, a conservative response strategy through cash holdings is recommended for investors. It is advised to prioritize risk management and invest cautiously during periods of high uncertainty.

In conclusion, September is a period that could put pressure on the market in terms of liquidity, and events like the Anthropic IPO could cause additional supply-demand volatility, thus requiring caution.

Choi Young-joo mentioned, "Regarding the decline in the exchange rate, we will have Q3 preliminary earnings around the end of October, after the September close. Then, cautious discussions are beginning to emerge, suggesting that profit estimates might need to be adjusted more than expected."

In particular, for the semiconductor industry, there is talk of a potential 10% revision to operating profit forecasts. Industries sensitive to exchange rate fluctuations could experience a greater impact.

The cosmetics industry is also cited as a sector highly sensitive to exchange rates and could experience a negative impact on sales. Conversely, the defense and shipbuilding industries might see differentiated impacts depending on the contract timing and exchange rate recognition.

Consequently, a lower exchange rate could act as a short-term earnings burden for export-oriented domestic companies, potentially leading to an adjustment in overall market profit forecasts.

The fact that investment-grade corporate bonds issued by IT companies are yielding 6-7% has led to a trend of investing in corporate bonds instead of government bonds.

This analysis, that supply-driven inflation has a structural path causing interest rate increases, provides important implications for understanding the current economic situation. A different policy approach may be needed compared to demand-pull inflation.

Consequently, the current economic situation is a complex interaction of supply-side changes and changes in the substitute market, and effective responses will require an accurate diagnosis of these factors.

As foreigners sold off their futures positions, it caused a sharp decline in the futures market. Yoo Young-hwa analyzed, "The futures market saw a sharp decline first. This was triggered by foreigners selling their futures positions. The sell-off began precisely at 2 PM. I believe it was not human selling but rather algorithmic selling, a large-scale algorithmic selling of futures by foreigners across Asian markets, and the resulting passive arbitrage chain reaction."

Subsequently, when a discrepancy arose between futures and spot prices, institutional investors mechanically sold off spot assets through algorithm-based arbitrage, accelerating the decline. This suggests that the selling was executed by automated systems rather than humans.

Simultaneously, there was an analysis that large-scale algorithmic selling of futures by foreign investors and a corresponding passive arbitrage chain reaction occurred across Asian stock markets. This signifies a simultaneous reaction across Asian markets to a specific issue.

Consequently, today's afternoon plunge is judged to have been initiated by foreign futures selling, with algorithmic trading and arbitrage acting in combination to amplify the decline.

It was argued that if the yen strengthens, concerns about the unwinding of yen carry trades increase. The head of department explained, "If the yen strengthens, you have to withdraw. Yes, when you withdraw, you have to pay back more money. I took it out when it was cheap and invested, but the yen strengthens. I borrowed it when the yen was cheap and invested, but if the yen becomes expensive, the money I have to pay back becomes more expensive."

This logic suggests that if one borrowed funds at a low interest rate when the yen was weak and invested in high-yield assets, a strengthening yen would mean having to pay back more when settling the debt, thus creating pressure to repatriate funds.

In this situation, the mention of a potential large interest rate hike by the Bank of Japan (BOJ) is exacerbating market confusion. Concerns are rising about whether Japan's rate hike will accelerate the unwinding of yen carry trades.

Furthermore, market confusion about the extent of coordination with the US Treasury Secretary is adding to the uncertainty. The unpredictability of Japan's monetary policy direction within international cooperation is affecting investor sentiment.

Key economic data release dates that will determine future market trends are approaching. The department head emphasized, "Perhaps tomorrow evening at 9:30 PM, the employment report will be released. It's very important. It needs to come out poorly. Yes. And then, next week, on September 11th, the CPI will be released. For those two, employment needs to be bad, and CPI, inflation, needs to come down. This is absolutely essential."

One of the most crucial dates is the US employment report, to be released on the evening of September 6th (local time). The market hopes for signals that the job market is not overheating, meaning employment figures that are worse than expected. This could alleviate pressure on the Federal Reserve to raise interest rates.

Following that, the CPI (Consumer Price Index) inflation figures will be released on September 11th. This is also a key indicator that will significantly influence market expectations for interest rate hikes, and investor sentiment is expected to improve if inflation shows signs of stabilizing downwards.

The results of these two indicators will have a decisive impact on the Federal Open Market Committee's (FOMC) monetary policy decision in September. The market is hoping for an ideal scenario of slowing employment and falling inflation.

Lee Kwon-hee stated, "Securities is bound to be the lowest priority, and I think insurance and banking are almost similar right now. Insurance first, banking second, then securities."

Currently, financial stocks serve as both an alternative to growth stocks and a defensive asset. With interest rates likely to remain high, interest-income-based banking and insurance sectors are showing relative strength.

In particular, the insurance sector is assessed as having the highest attractiveness, showing significant profit improvement during periods of rising interest rates. Banking comes next after insurance, while securities tend to fall to a relatively lower priority.

This preference for financial stocks over growth stocks during periods of high interest rates reflects investors' search for stability and consistent income.

Following foreign futures selling, program selling, mainly from financial investment firms, concentrated in the range of 450 to 500 billion won, accelerating the index's decline. This indicates that mechanical trading linked to futures had a significant impact on the market.

A notable point is that when supply and demand were checked at market close, only individual investors net sold over 1.1 trillion won, while foreigners and institutions switched to buying during the session. This suggests that individual investors participated in panic selling, while institutions and foreigners may have engaged in bargain hunting.

Consequently, the afternoon plunge is analyzed to have been triggered by foreign futures selling, with program selling driving down the index, and individual investors' sell-off contributing to the widened decline, while institutions and foreigners simultaneously used it as a buying opportunity.

This can be interpreted as a signal that short selling will decrease in the future. It implies that short sellers either do not deem it profitable to exert additional downward pressure or believe that the stock price will not fall significantly further.

Compared to the inflection point in April, a sharp decrease in the stock loan balance has often been linked to market bottoming. Therefore, the current decrease in the stock loan balance can be seen as a positive signal indicating a potential easing of downward market pressure.

Consequently, a decrease in the stock loan balance signifies a reduction in short sellers' selling positions, which lowers the possibility of further market declines and increases expectations of a market bottom.

The current market heavily relies on artificial intelligence (AI) momentum rather than the economy itself. Analyst Lee Ji-wan warned, "If the AI momentum is thought to have largely run its course, then we need to consider a major bear market. At that point, you shouldn't buy stocks. Stock investing is for making profits, not for incurring losses."

If the AI momentum fades or is judged to have run its course, it is advised to prepare for a major bear market and refrain from buying stocks. He emphasized that stock investing is for making profits, not for enduring losses.

Citing the Coca-Cola case, he mentioned the risk of blindly 'HODLing' (holding on). Even a blue-chip stock that once led the market can suffer prolonged sluggishness if it misses the trends of the times.

In conclusion, investors need to carefully observe the sustainability of AI momentum, and if this momentum weakens, they should adopt a flexible strategy of decisively liquidating positions and preparing for a major bear market.

Analyst Lee Ji-wan explained, "Honestly, I don't think Solidigm's listing will be such a bad thing. It's a company with 1 trillion won in operating profit. Hynix earns 60 trillion won per quarter. It doesn't really show much."

Even if Solidigm's operating profit is around 1 trillion won, its contribution is considered not significant compared to Hynix's quarterly revenue of 60 trillion won. Therefore, it is analyzed that Solidigm's listing is unlikely to act as a direct negative factor for Hynix's fundamentals.

However, he pointed out that it should be distinguished from disappointment caused by internal corporate issues, such as management's ethical problems. While the fundamental impact is small, it could have a negative effect on investor sentiment.