Interest Rate Hike Period: Now Is the Time to Endure

He explained that he recently took some profits from stocks, acknowledging that this decision might feel somewhat unfamiliar to individual investors.

As individual investors began selling, the index rebounded, indicating a correlation between individual trading trends and market reversal.

Yoo Chang-hee, CEO, remarked that institutional investors purchasing 1 trillion won worth of stocks in a single day is an unusual phenomenon. He added that pension funds often show a pattern of large-scale buying during the trading day and selling before market close. In particular, this buying trend showed a concentration of supply in large-cap semiconductor stocks.

He also pointed out that securities firms immediately issued comments shortly after the related news was announced via Reuters. He suggested the possibility that institutions had prior information before the news broke or distributed pre-prepared comments as soon as the news was released.

Yoo Chang-hee, CEO, mentioned that rumors of SK Hynix's OSAT (Outsourced Semiconductor Assembly and Test) investment are resurfacing, despite being denied in July. He cited the past case of Westinghouse acquisition rumors being denied but later actualized, suggesting a potential discrepancy between official statements and market news. This OSAT investment is also expected to be an investment in related technology and production lines rather than an acquisition.

Yoo Chang-hee, CEO, evaluated that former CEO Lee Seok-hee played a key role in securing HBM (High Bandwidth Memory) technology. He analyzed that Lee's move to Intel could further highlight a scenario of strengthening cooperation between Intel and SK Hynix.

Considering the high labor costs and manufacturing costs in the US, Yoo Chang-hee, CEO, believed that large-scale production would not be easy. He also raised concerns about the realistic limitations of achieving the high precision required for semiconductor production in the US.

Despite FOMC (Federal Open Market Committee) vigilance and rising government bond yields, a concentration of supply in the semiconductor sector is prominent. Yoo Chang-hee, CEO, explained that investors inevitably choose high-performing companies less sensitive to interest rate volatility, with semiconductors at the center. The influx of capital into semiconductor materials, components, and equipment (SooBujang) companies served as an opportunity to confirm the market's support.

He judged it as a temporary rise due to short-term issues, pointing out that most related stocks remain at their lows. If one were to choose, he believed that Daehan Optical Communication or RF Materials might be worth considering, but a strategy focusing on US companies would be necessary.

Yoo Chang-hee, CEO, emphasized that how the market reacts after the FOMC is more important than whether interest rates are frozen. He stated that he liquidated some credit positions for risk management and would set the buying timing for next week after seeing the FOMC results. His judgment is that confirming the market's direction after interest rate volatility is a priority.

Yoo Chang-hee, CEO, pointed out that it is difficult to judge a market crisis based solely on rising interest rates. He explained that to assess the market's risk level, one should refer to the 'MOVE Index,' a bond market volatility index, and analyzed that the current MOVE Index is stable at a moderate level compared to past crisis points.

Yoo Chang-hee, CEO, explained that corporate credit risk, as measured by CDS (Credit Default Swap) premiums, is not high compared to the past. He interpreted that the rise in interest rates is due to increasing fiscal deficits and a decrease in the attractiveness of government bonds due to increased bond issuance by big tech companies, rather than problems with US companies or concerns about the US economy. Therefore, he judged it unlikely to be an immediate direct factor causing a sharp drop in stock prices.

The worst-case scenario is a benchmark interest rate hike and a sustained rise in the 10-year Treasury yield (5.2-5.3%), in which case the stock market could fall for nearly a year. The second scenario is a gradual rise or stabilization of interest rates along with slowing inflation, allowing the stock market to rise moderately. The last scenario is when inflation falls faster than expected, and expectations of interest rate cuts increase.

Yoo Chang-hee, CEO, analyzed the market assuming four interest rate hikes, predicting a gradual rise in the stock market during the initial two rate hike periods. However, he foresaw a potential stock market adjustment from next spring to summer due to the impact of interest rate hikes. He added that the period after summer, when discussions about interest rate cuts become serious, could be an opportune time to buy stocks.

His stance is that a strategy of additional buying during a decline is effective rather than stop-loss selling.

Yoo Chang-hee, CEO, presented bottom defense lines for major stock market indices. He expected the KOSPI not to break below approximately 6,200, suggesting that buying should be considered in that range. For the KOSDAQ, he believed that an impact down to 750 might occur, but this should also be approached as a buying point. He also predicted that the Nasdaq index would be supported at around 25,000, generally emphasizing the market's downside rigidity.