Waller Hints at Rate Freeze, New York Stock Market Rises

Long-term bond yields, which had troubled the market throughout August, showed a decline. This, combined with the appreciation of the Japanese yen and hints from the Bank of Japan (BOJ) about potential interest rate hikes, led to an inflow of buying into US Treasuries. As a result, a virtuous cycle emerged in the market, with the Nasdaq rising.

Commerce Secretary Rutnick expressed intent to impose semiconductor tariffs but also promised tariff exemptions for semiconductor companies that build production facilities in the US, covering 2.5 times their production volume. This will transition to a 1.5 times production volume exemption after completion. This US strategy is being analyzed as similar to the pressure exerted on Japanese companies during the 1980s US-Japan Semiconductor Agreement.

According to yesterday's report, a review for dispatching troops to the Strait of Hormuz is underway to some extent, and a troop dispatch consent bill to be submitted to the National Assembly is being considered. The Blue House stated that no official decision has been made yet, but the possibility of dispatch is gradually becoming more visible. This is interpreted as a response to a US request.

The New York stock market rose across the board after Federal Reserve Governor Christopher Waller hinted at a September interest rate freeze. Following his remarks, all three major US indices recorded gains of over 1%. A positive atmosphere permeated the broader market, coupled with major stocks approaching new record highs.

Semiconductor stocks are in a situation where additional purchases are limited as supply has already been met. This appears to be because investors are no longer buying. A sector rotation phenomenon, synchronizing with the US market, is occurring, with funds observed moving to sectors other than semiconductors.

The sharp rise in the yen and strength in the won caused a 10% loss in institutional investor portfolios. This triggered an automatic, mechanical selling system in the derivatives market, resulting in a momentary market plunge. This is analyzed as an aftermath of NK carry position liquidations due to the strong yen and won.

With the 10-year Treasury yield currently at 4.8%, market caution is rising. In the past, just before the IT bubble burst in 2000, 10-year Treasury yields reached 6%, and during the 2007 global financial crisis, they hit 5.3%. Such high interest rates are acting as a factor amplifying market 불안감.

Individual investors in Korea have an excessively concentrated portfolio, with Samsung Electronics and SK Hynix accounting for over 40%. In the absence of leading stocks, investors, believing that Samsung Electronics and SK Hynix will not fall further, are tending to rotate their spare funds into other sectors. This is interpreted as a move to avoid excessive concentration in specific stocks and explore other market opportunities.

Market expectations have increased following Governor Christopher Waller's positive remarks, making a September rate freeze more likely. Waller mentioned that he would support a rate freeze if inflation indicators remain as expected. The probability of a rate hike, which was nearly 70% just before his statement, fell to 50%, a 50/50 chance, and growth stocks, particularly AI-related ones, rebounded in the US market.

A block deal of 1.4 trillion won involving other corporate entities related to POSCO has been confirmed. Expert Lee Seon-yeop confirmed the POSCO block deal, suggesting its potential impact on the market.

Despite Alteogen announcing a large-scale licensing-out deal worth 4.4 trillion won, its stock price declined. On the day of the announcement, a long upper wick appeared, followed by a sharp drop the next day. This is attributed to program selling and unstable supply and demand. Even with a win in the patent dispute with Halozyme, investor sentiment has worsened, making the support level of the previous low of 270,000 won a critical point.

If Tesla's Cybertruck begins mass production, domestic battery and materials, parts, and equipment (Soo-Boo-Jang) value chain companies are expected to benefit. Particularly, LG Energy Solution, which supplies battery cells, L&F, a cathode material company, and LG Innotek and Samsung Electro-Mechanics, which produce camera modules, are drawing attention. As mass production officially begins after the prototype stage, related companies are anticipated to generate revenue.

The Chinese stock market is in an almost dependent variable relationship with Korea's KOSPI. In the past, the Chinese stock market was also led by semiconductors, but after the semiconductor sector collapsed, it showed overall weakness. Recently, there have been positive developments such as CXMT becoming the top market cap and successful IPOs, but corporate performance differentiation is clearly evident, with companies like Unigroup plummeting after listing.

The Chinese economy is demonstrating resilience thanks to diversified export regions and items. Even non-AI related items are recording high export growth rates of over 20%. Furthermore, export regions are diversified globally, limiting the impact of US regulations. Despite domestic consumption sluggishness, productivity-oriented export industries are acting as a major driving force sustaining the Chinese economy.

China's CXMT surpassed 10% market share in the DRAM market in Q2, demonstrating significant growth potential. It is reportedly planning to double its capacity by 2028. This suggests that the pace of China's expansion could become a burden on the market during future price decline cycles.

Analysis suggests that China has already missed the timing for opening its financial markets. Expert Kim Kyung-hwan judged that while opening the financial market is not impossible, the opportune moment has passed. The absence of foreign exchange strategy and institutional changes limits the possibility of foreign capital inflow.

With the Chuseok holiday scheduled for September 24th and 25th, the number of business days is expected to decrease. Consequently, there is a possibility that September's export data may decline compared to the previous month. Concerns are rising that the reduction in working days due to the holiday could affect the total export volume.

The potential for spread improvement in the steel industry is being observed. This is due to reduced cost burdens from production cuts amid sluggish conditions in China's steel industry and falling iron ore prices. Simultaneously, increased demand for data center infrastructure investment raises the possibility of price increases, leading to a spread expansion phenomenon observed since July and August.

As oil prices recently surged past $80, the possibility of the Federal Reserve (Fed) raising interest rates again has emerged. The drastic change in the oil price chart and the uncertainty of the Fed's model are amplifying market concerns. While a rate freeze is expected in September, market forecasts for a rate hike by year-end are mixed.

In a high-interest rate environment, a sector rotation strategy focused on top-line sales is deemed effective until year-end. In a rotating market, instead of chasing specific stocks, it is recommended to buy various stocks evenly and realize profits at a 5-6% rise, employing a volatility management trading method. Attention should be paid to the October earnings season and November policy momentum.

Market expectations have increased after Fed governors, including Christopher Waller, stated they would support an interest rate freeze contingent on easing inflation data. This shift in stance from hawkish members is fueling debate about market front-running. However, critics point out that the term 'conditional' is used without specific figures, leading to broad interpretation.

It was suggested that past cases should be referenced as criteria for judging the yen carry trade unwinding phenomenon. The most recent example is the unwinding speed recorded from late July to early August 2024. While there are no fixed figures, it is necessary to compare the current situation with the speed at which unwinding occurred in the past.

Major banks from five regions—the US, Japan, and Europe, including Goldman Sachs, Citi, and Bank of America—announced an agreement to establish a joint entity to issue stablecoins. They aim to launch a dollar-backed stablecoin in the first half of next year and plan to expand to G7 currencies thereafter. This is expected to accelerate the integration of digital assets into global financial markets.