Despite Samsung Electronics' Boost, Market Unease Persists… Time to Secure Cash, Not Chase Buys

Jang Woo-jin, CEO of Geum Si Gong, predicted that the explosive surge in Samsung Electronics' stock immediately after the announcement would be limited, as expectations for the share buyback and cancellation were already priced in. He advised that since the stock already rose significantly yesterday, there is no need to hastily chase it simply due to the announcement.

Jang stated, "It rose a lot yesterday, didn't it? Samsung Electronics, on anticipation. So, whether to rush to chase it, I'm still not sure." This is interpreted to mean that a cautious approach is needed despite the positive news.

An analysis suggests that expectations for share buybacks and cancellations to lead to corporate valuation reratings have had less effect in reality than anticipated. Jang Woo-jin pointed out that an analysis of past cases of large domestic companies showed that stock reactions were often minimal after share buyback and cancellation announcements.

Jang explained, "What we expect is that if there's a share buyback and cancellation, everyone will say, 'Let's go, it's a valuation rerating!' 'Because Korean companies are doing shareholder returns, the Korea discount will be resolved.' But even though many companies are doing this, the market hasn't reacted as much as expected." This is interpreted to mean that a company's fundamental competitiveness and market environment have a greater impact on stock prices than the share buyback and cancellation itself.

An analysis indicates that U.S. Treasury yields are rising again despite buyback expectations, heightening market anxiety. Jang Woo-jin noted that 10-year and 30-year Treasury yields, after falling temporarily, rebounded, interpreting this as a sign that the buyback policy's effect is more modest than expected.

Jang commented, "Interest rates are still uncomfortable. What we liked yesterday was that 10-year yields fell to the 4.6% range due to the buyback. And 30-year yields also fell to 5.1%, but now they've risen again. That means people are saying the buyback isn't as meaningful as thought." He also warned that rising TIPS (Treasury Inflation-Protected Securities) yields could increase the real interest burden, negatively affecting corporate investment and consumer sentiment.

A warning has been issued that the surge in diesel crack margins, rather than international oil prices (WTI), could pose a greater threat of inflation. Jang Woo-jin stated that current diesel crack margins are soaring, nearing $90 to $96, almost $100. This signifies a significant expansion of oil refining margins, meaning a sharp rise in prices for refined products like diesel and gasoline used by consumers.

Jang explained, "If you look now, crack margins are $90, $96, almost $100. If you add 88 + 96, it's almost $200, $170, $180... We don't use crude oil. We use refined products like diesel and gasoline, and their prices are skyrocketing due to damage to refining facilities, causing an actual shortage." He expressed concern that rising diesel prices directly impact logistics costs, potentially leading to a general increase in prices and intensifying inflationary pressures.

It has been pointed out that the U.S. Strategic Petroleum Reserve (SPR) has fallen to 1983 levels, indicating insufficient capacity for further oil releases to control prices. Jang Woo-jin explained that with crude oil demand significantly increased, the SPR being at a historical low means the U.S.'s ability to control oil prices is limited.

Jang stated, "The reserve level is at 1983 levels now. Compared to then, crude oil demand has increased significantly, so the fact that the reserve is at 1983 levels means the U.S. has released a lot of its reserves and is limited in releasing more." This suggests that even if international oil prices rise, the U.S. will find it difficult to adjust prices by releasing reserves, implying sustained upward pressure on oil prices.

An opinion emerged that the Federal Reserve's (Fed) decision to freeze interest rates might not be positive for the market. Jang Woo-jin analyzed that August inflation figures are likely to rise, and a rate freeze in the absence of positive factors like Trump's policy changes or falling oil prices could burden the market.

He said, "I don't view that freeze very favorably. August inflation will naturally go up. If that data goes up and there are no clear Trump policies or falling oil prices, the market will be burdened." This implies concern that a rate freeze could, paradoxically, lead to rising long-term bond yields, exacerbating market instability.

A claim was made that if the Fed freezes interest rates, long-term bond confidence could decline, imposing a significant burden on the market. Jang Woo-jin warned that the Fed should raise rates to control inflation, but if it doesn't, investors' distrust in long-term bonds will deepen.

He emphasized, "As you said, if interest rates are frozen, what will happen to long-term bond yields? Their reliability will fall. The Fed should raise rates to slow growth, but if it doesn't, there might be more sentiment of not trusting long-term bonds." He added that the continuous rise in long-term bond yields could increase corporate funding costs and slow overall economic growth, posing a serious risk to the market.

The U.S. debt reaching $40 trillion with high interest rates is increasing the government's interest repayment burden, pointed out Jang Woo-jin. He analyzed that this leads to a global decline in confidence in the dollar, which is a major reason investors are turning to real assets like gold and Bitcoin.

Jang explained, "The debt size is $40 trillion, isn't it? With this much debt, interest rates are high. So the government has to keep using its fiscal deficit to pay interest. It needs to lower rates quickly, but it's ambiguous. Long-term rates rose simultaneously worldwide, didn't they? That means the whole world distrusts currencies. Then they turn to real assets like gold." He predicted that the global simultaneous rise in long-term interest rates indicates growing distrust in national currencies, which will spread skepticism about the traditional monetary system and intensify the trend of highlighting the value of real assets.

An analysis suggests that the effectiveness of U.S. economic sanctions against Iran will be limited due to China and Russia, Iran's major trading partners. Jang Woo-jin pointed out that while the U.S. attempts to pressure Iran through economic sanctions instead of military action, direct economic retaliation against Russia and China, Iran's largest trading partners, is virtually difficult.

Jang said, "The U.S. said it wouldn't attack militarily, but would pressure Iran through economic sanctions. However, Iran's biggest trading partners are Russia and China. So, economic retaliation against Russia and China is actually quite limited. If the policy to prohibit oil smuggling really works, global crude oil supply would decrease." He added that if the policy to prohibit Iran's oil smuggling genuinely takes effect, global crude oil supply could decrease, further increasing upward pressure on oil prices.

It has been pointed out that the Treasury's bond buybacks are fundamentally different from the Federal Reserve's (Fed) quantitative easing (QE). Jang Woo-jin explained that the market misunderstands the Treasury's buybacks as similar to the Fed's QE in providing liquidity, but the two policies differ significantly in their funding methods.

He said, "What we initially thought was this: 'Oh, the Treasury is doing a role similar to the Fed's QE.' But it turns out to be different. The Fed can print money, so unlimited QE is possible, but the Treasury's buybacks require funds." This means that while the Fed can provide unlimited liquidity through its power to issue currency, the Treasury must raise funds through bond issuance, among other means, thus not resulting in a real increase in assets. This is merely a reinvestment of maturing bonds, and its effect on providing new liquidity is limited, he criticized.

An analysis suggests that the Treasury's bond buybacks could inflict significant losses on primary dealers. Jang Woo-jin stated that dealers who held large quantities of bonds during times of low interest rates are now facing substantial valuation losses as bond prices have fallen by over 30-40% due to current high interest rates.

He explained, "Bond prices have fallen by almost 30-40% or more. So, buybacks are done at the lowered price, not at cost or par value. So, losses are already incurred." Since buybacks are based on current market prices rather than par value, dealers must absorb losses. This, he noted, is a major factor deterring dealers from actively participating in long-term bond auctions.

An analysis suggests that the current market situation is fundamentally different from last year's 'stealth quantitative easing (QE)' during the market rebound. Jang Woo-jin pointed out that last year, liquidity issues arose due to temporary supply-demand imbalances, but now, structural problems caused by inflation are occurring, preventing the Federal Reserve (Fed) from acting easily.

He emphasized, "If we look at whether the current situation is the same, it's not a temporary supply-demand twist. Now, there are clearly problems arising due to inflation, and liquidity-related issues have occurred while the Fed is unable to move." This implies that the current liquidity issues are not just a one-off event but stem from fundamental economic problems, and the Fed is caught in a dilemma between curbing inflation and stabilizing financial markets.

The core of former President Donald Trump's remarks on cryptocurrency is to classify cryptocurrencies as 'commodities' through the 'Clarity Act,' analyzed Jang Woo-jin. This bill aims to define whether cryptocurrencies are classified as securities or commodities.

Jang explained, "Trump's comments on crypto were twofold, there's the Clarity Act. It's a policy that defines whether a coin itself is a commodity or a security. If it's defined as a security, it's troublesome, so they want to define it as a commodity." If cryptocurrencies are classified as securities, they would be subject to strict regulation by the Securities and Exchange Commission (SEC), but if classified as commodities, they would fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), potentially reducing regulatory burdens, which is a significant concern for the industry.

An analysis suggests that former President Donald Trump's Bitcoin strategy goes beyond merely endorsing the cryptocurrency market; a bigger picture involves promoting stablecoins to increase demand for short-term bonds. Jang Woo-jin explained that the true intention behind incorporating Bitcoin as a strategic asset is to foster the growth of the stablecoin market.

He emphasized, "The most important thing is that for stablecoins to be activated, demand for short-term bonds must increase. Then the pieces fit perfectly together." The logic is that increased stablecoin issuance would lead stablecoin issuers to purchase U.S. short-term bonds as collateral, naturally increasing short-term bond demand. This aligns with the Treasury's policy of adjusting short-term bond issuance rates and can be interpreted as the Trump administration's strategy to utilize the cryptocurrency market as part of its economic policy. Ultimately, the claim is that it has a long-term goal of securing funding and monetary policy flexibility through cryptocurrencies.

It has been pointed out that while the topline results of the mRNA-based cancer vaccine's Phase 3 clinical trial were significant, this does not mean it is a complete cancer cure. Jang Woo-jin stated that full clinical results have not yet been released, and while the topline results are positive, a cautious approach to actual treatment efficacy is needed.

He said, "Looking at the topline results of the Phase 3 clinical trial, the full results aren't out yet, but the topline results show significant findings. However, calling it an mRNA-related vaccine is a bit ambiguous." He explained that this vaccine is more a supportive tool to prevent cancer recurrence rather than a means to prevent or completely cure cancer. However, he added that related theme stocks are forming due to expectations for the market expansion of mRNA-based technology.

It is difficult to expect a sharp rebound in the current stock market, and it is wise to secure cash and prepare for a market correction rather than chasing buys, advised Jang Woo-jin. He analyzed that the KOSPI index's movement is weaker than expected due to foreign investor supply-demand pressure, and slowing U.S. consumption and interest rate burdens continue to weigh on the market.

He emphasized, "There is clearly pressure on futures today, so we need to be cautious. So, don't rush to follow. Now is the time to step back a bit, secure some cash, and be less greedy." Jang concluded that with high global economic uncertainty, it is a time to focus on risk management with a cautious stance rather than aggressive investment. He added that slowing U.S. consumption, confirmed by poor Walmart earnings, is increasing global economic slowdown concerns and burdening the market.