KOSPI's Delay in Recovering 7,000 Points… What's the Cause?

After a sharp fall, the domestic stock market rebounded, but it has repeatedly failed to recover the 7,000 point level. Currently, the market lacks positive events strong enough to push it past 7,000, and overly high expectations for Samsung Electronics' shareholder returns led to disappointment. Furthermore, with third-quarter earnings announcements and the U.S. midterm elections scheduled for October after Chuseok, there's a forecast that the market sentiment won't be bad from that point.

The first reason cited for the failure to recover 7,000 points is the depletion of market catalysts with the end of the second-quarter earnings season. Despite Nvidia's earnings announcement, it wasn't fully reflected, leaving some regret. The second reason mentioned is that market expectations for shareholder returns were too high. Although Samsung Electronics announced shareholder returns of 90 to 110 trillion won, market expectations were at least 120 trillion won, leading to disappointment.

The persistent high level of U.S. interest rates, showing no signs of easy decline, is also a reason for the market's sluggishness. Concerns about interest rate hikes have intensified due to hawkish remarks by Fed Chair Washington. Amid this uncertainty, a sharp decrease in market trading volume and a reduction in deposits, indicating individual investors shifting to a wait-and-see attitude, are identified as the biggest reasons. In the past, a positive development like Nvidia's would have easily led to the KOSPI breaking 7,000, but currently, the market lacks momentum due to a lack of interest.

Until before Chuseok, the market is not expected to fall significantly, but breaking the 7,000 point mark will also be difficult. A sluggish trend is expected to continue for a while, with the biggest variable in September being the FOMC meeting scheduled for September 16. While market volatility often increases around Chuseok, this year, with the U.S. midterm elections also scheduled after Chuseok, an unusual turn of events is expected.

The first key point is whether interest rates will be raised at the September FOMC meeting. The current market sentiment leans towards an interest rate hike, but U.S. employment reports in early September and U.S. consumer price data in mid-September need to be confirmed. If inflation stabilizes, there is a high possibility that the FOMC will freeze interest rates, according to analysis. Additionally, Micron's earnings, which will be announced before Samsung Electronics in the last week of September, will be an important variable.

In October, third-quarter earnings announcements and additional shareholder return announcements from Samsung Electronics and SK Hynix are expected. Traditionally, the U.S. stock market tends to show weakness in September since 1980, followed by a rebound from October ahead of midterm elections, which is also a positive factor. Therefore, while it may be sluggish around Chuseok, the market has the potential to trend upwards from October after Micron's earnings announcement.

Samsung Electronics announced shareholder returns of 110 trillion won, but there was disappointment that it fell short of market expectations. While there was mention of a third-quarter dividend, the lack of a clear plan for treasury stock purchases or cancellation for the remaining amount led to a stock price decline. However, Samsung Electronics' shareholder return scale of 90 to 110 trillion won is the first in Korean history, and it is absolutely high even compared to Apple's annual payment of 125 trillion won. Especially considering that Samsung Electronics and SK Hynix are companies that need to invest heavily in facilities, this scale of shareholder return can be considered remarkable.

From Samsung Electronics' perspective, it is unavoidable that it is difficult to announce an accurate amount at the third-quarter mark. While shareholders may be disappointed by the lack of clarity, this situation needs to be understood.

A 30 trillion won dividend from Samsung Electronics has been confirmed for the third quarter. In terms of stock price, treasury stock cancellation can have a more positive impact. SK Hynix plans to purchase and cancel more than 600 million won worth of shares daily for 60 days, which will greatly help stock price defense. Samsung Electronics, on the other hand, is pursuing shareholder returns through dividends.

If the ownership percentage exceeds the legal limit, they would have to sell their shares. If the government applies the Financial Industry Separation Act flexibly, Samsung Electronics might switch to treasury stock purchases and cancellation, but currently, dividends are more likely.

If treasury stock is cancelled, Samsung Life and Samsung Fire would face legal issues requiring them to sell their Samsung Electronics shares. Unless the government applies the Financial Industry Separation Act flexibly, Samsung Electronics will have no choice but to maintain its dividend policy. Therefore, it is difficult to definitively say which company, Samsung Electronics or SK Hynix, is better in terms of shareholder returns. Retired investors who need monthly cash flow might find Samsung Electronics, which pays high dividends, more advantageous. Samsung Electronics preferred shares are expected to have an estimated dividend yield of 8% next year. On the other hand, investors who desire a stock price increase story through treasury stock purchases and cancellation, like Apple, might find SK Hynix a better choice.

Without corporate profits, large-scale shareholder returns are impossible. Therefore, investors should continuously verify and update how robust the memory semiconductor business environment will remain, rather than focusing solely on the two companies' shareholder return policies.

This is a new record of 13 consecutive quarters of revenue growth and significantly exceeded market consensus. CEO Jensen Huang emphasized that AI has reached an inflection point, and these results clearly demonstrate that the AI semiconductor supercycle will be further extended. This is expected to serve as a positive signal not only for Nvidia but also for the entire AI semiconductor market.

There were two surprising aspects to Nvidia's earnings. First, Nvidia, which usually does not announce next year's revenue guidance, unusually released guidance for the coming year. While market expectations were for a 44% increase, Nvidia projected a 70% increase. CEO Jensen Huang stated that a 100% increase would have been possible if there hadn't been supply bottlenecks, clearly demonstrating that demand for AI accelerators is much higher than anticipated.

CEO Jensen Huang stated that he expects 70% growth instead of 100% due to this bottleneck. This clearly shows that demand for Nvidia AI accelerators is much higher than market expectations. The market was surprised by the much higher 70% growth compared to the previous estimate of 44%, and it is noted that potentially 100% growth was possible.

The second surprising aspect of Nvidia was customer diversification. In the past, there was criticism and concern about high reliance on hyperscalers (big tech companies) such as Amazon, Microsoft, Meta, and Google. However, in these earnings, the proportion of non-hyperscalers, i.e., other customers including countries, SMEs, and startups, grew almost identically to hyperscalers. Furthermore, the growth rate of non-hyperscalers was 138%, surpassing the 103% growth rate of hyperscalers. This is an important indicator that addresses market concerns.

Through this earnings announcement, CEO Jensen Huang proved with results that the AI supercycle is continuing. He also mentioned that memory prices will rise next year. He stated that product prices inevitably have to increase due to rising memory semiconductor costs, and high-bandwidth memory (HBM) used in Nvidia chips will also face price increase pressure. Nvidia is expected to accept higher HBM prices and continue the structure of selling them at a higher price to customers like Microsoft.

Nvidia's recent earnings announcement delivered very significant results by resolving most of the issues the market was concerned about. The surge in demand for AI accelerators, explanations for supply bottlenecks, and the diversification of customers with high growth rates from non-hyperscalers support this. However, it is regrettable that domestic memory semiconductor-related stocks did not react adequately despite such positive earnings.