Korean Stock Market Declines Amid U.S. Stock Market's Record Highs… Increased Foreign Short-Term Trading

Expectations for interest rate cuts are rising again as U.S. employment figures significantly undershot market expectations. With the employment number announced as a decrease of 23,000, contrary to the anticipated increase of 83,000, the probability of an interest rate hike dropped to the 50% range. This can be interpreted as a sign that the U.S. Federal Reserve's (Fed) tightening stance may ease. Such changes could have a positive impact on the U.S. stock market.

An unusual phenomenon is being observed where the won/dollar exchange rate continues to fall despite the sluggish performance of the Korean stock market. Typically, when the domestic stock market is weak, the exchange rate tends to rise due to foreign capital outflow, but currently, a distinctive feature is that foreign capital is not largely exiting. This suggests that even if foreign investors sell domestic stocks, they are likely holding the funds domestically to seek other investment opportunities rather than converting them back to dollars and sending them to their home countries.

The U.S. stock market continues its solid upward trend, with the S&P 500 index reaching new record highs. In contrast, the Korean stock market is experiencing a peculiar phenomenon, undergoing a correction detached from this global bull market trend. The U.S. market's boom appears to be driven by improved corporate earnings and expectations of interest rate cuts, while the weakness in the Korean market is attributed to complex factors such as domestic and international uncertainties or supply-demand imbalances. This divergence between the two markets is causing confusion for investors in formulating their investment strategies.

Despite the Philadelphia Semiconductor Index showing an upward trend, SK Hynix's American Depositary Receipts (ADR), a major domestic semiconductor company, actually declined by about 3%, showing a sluggish performance. Micron held up relatively well, but Seagate fell even more significantly. This indicates that even though Nvidia rose by 2.27% and drove the Philadelphia Semiconductor Index upward, the individual movements of domestic semiconductor companies are showing a different pattern. Particularly noteworthy is the decline in SK Hynix's ADR, which supplies HBM, despite Nvidia playing a key role in the increased demand for HBM.

While Nvidia, a leader in AI semiconductors, continues its rally, setting new highs, domestic semiconductor companies' stock prices are paradoxically declining. Nvidia's growth should lead to improved earnings expectations for companies like Samsung Electronics and SK Hynix, which supply key components like HBM (High Bandwidth Memory), but actual stock prices are moving in a different direction. Considering that Nvidia assembles components from TSMC, SK Hynix, etc., to make finished products, the decline in domestic semiconductor companies' stock prices is pointed out as an inexplicable phenomenon.

With SpaceX's public offering price recovering, market investor sentiment is also turning positive. Initially, there was much negativity, but as the stock price began to rise, investor interest concentrated, and past negative evaluations tended to turn positive. This is a typical phenomenon that occurs when supply and demand logic operates in the stock market, as the psychological tendency to seek positive reasons for a stock price increase becomes stronger once it starts to rise. Such shifts in sentiment can affect not only specific stocks but also the overall market trend.

Investors who invested in the domestic semiconductor market are experiencing a sense of 'betrayal.' This is because, despite long-term belief in the earnings improvement and growth potential of semiconductor companies, stock prices often haven't risen as expected or have even declined. Particularly, when other global semiconductor companies show strength while domestic companies appear to be sidelined, trust in earnings is shaken. This sense of betrayal is a phenomenon in the domestic stock market that can negatively impact investor sentiment.

Global investment bank JP Morgan projected that Samsung Electronics' HBM (High Bandwidth Memory) market share could rise to an unexpectedly high 38%. Additionally, analysis suggests that HBM yield has also been raised to 80%, leading to positive evaluations of Samsung Electronics' strengthened HBM competitiveness. Such reports indicate that Samsung Electronics is making significant progress in the HBM competition with SK Hynix, which could raise expectations for future earnings improvement.

Positive rumors are spreading in overseas markets, including Hong Kong and Taiwan, that SK Hynix will significantly increase its dividends. These rumors are raising expectations for SK Hynix's strengthened shareholder return policy and can act as a factor attracting foreign investors' interest. A company's dividend increase is considered a positive signal for enhancing shareholder value, which can contribute to increasing long-term investment appeal.

As major domestic semiconductor companies like Samsung Electronics and SK Hynix continue to struggle with their stock prices, market expectations for share buybacks and cancellations are growing. Share buybacks and cancellations are a representative method of reducing outstanding shares, thereby increasing per-share value and demonstrating a commitment to shareholder returns. According to relevant articles, both companies show signs of leaning towards share buybacks and cancellations, and market attention is focused on the potential stock price boosting effect. Investors are watching closely how these shareholder return policies will actually affect stock prices.

It was advised that investors who invested in recently surging HBM (High Bandwidth Memory) related stocks or Sphere (semiconductor equipment related stocks) should consider reducing their positions, keeping in mind the possibility of a short-term peak. This is because stock prices often undergo some correction after a sharp rise. Experts suggested that it is effective to realize some profits at this point, increase cash holdings, and then buy again if a correction occurs. This is one method to manage risk and maximize profits in a volatile market.

For investors who have experienced a recent downturn, a trading strategy is recommended to quickly detect market changes, realize profits through a 'short-term' approach, and secure cash. This means converting profits into cash immediately and re-entering when new investment opportunities arise, thereby increasing cash utilization. This is presented as a realistic method for individual investors to minimize losses and pursue stable returns in a market environment with intensified foreign short-term trading. It was emphasized that flexible cash management is important to respond to market volatility.

Kumho Petrochemical announced its Q2 earnings, reporting an operating profit that surged 420% year-on-year, surprisingly exceeding market consensus by 131%. This result comes despite the company's stock being undervalued, having received excellent evaluations across all aspects including earnings, financial health, and shareholder return policies. This strong performance from Kumho Petrochemical, which had not received much market attention, is expected to act as a catalyst for future stock price increases. The unexpected earnings improvement from a previously uninteresting stock is sufficient to draw market attention.

An analysis suggests that sectors such as petrochemicals, biotech, and secondary batteries, which are currently at their bottom and attempting a rebound, have entered an attractive range from a trading perspective. In addition, power equipment related stocks like LS Electric, Hyundai Electric, and Hyosung Heavy Industries are also showing decent trends, preparing for a trend reversal, and are expected to offer trading opportunities. This indicates the possibility of industries that were previously leading but recently underwent a correction to regain attention, emphasizing the need for a short-term approach.

A perception is detected that foreign investors generally view the Korean stock market as undervalued. While Samsung Electronics and SK Hynix are showing a 1-2% increase, an analysis suggests that domestic companies across various sectors are considered relatively inexpensive. This can be seen as a positive sign that could increase the possibility of long-term foreign capital inflow. However, close observation is needed to determine whether this undervaluation perception will only be utilized for short-term trading opportunities or will lead to long-term investment.

An analysis suggests that in early August, the domestic stock market became a 'playground' where overseas hedge funds could easily move to seek short-term profits. It is believed that hedge funds have increasingly dominated the market, taking advantage of weakened buying by individual and institutional investors. In such a situation, market volatility can increase, and unpredictable movements may occur frequently, so investors need to approach the market with a more conservative perspective. This phenomenon was particularly noticeable from late July to early August.

It was advised to focus on small and mid-cap stocks that are relatively less affected by foreign investors' short-term trading. Particularly, communication equipment stocks like RFHIC and KMW are showing signs of attempting a trend reversal. These stocks are smaller in scale, making them less susceptible to large-scale trading by foreigners and thus relatively free from the influence of speculative funds like hedge funds. If they possess stable earnings and growth potential, they can be expected to rise steadily without being swayed by foreign short-term trading.

The recent surge in trading volume for specific stocks in the stock market holds significant meaning. This indicates a large-scale 'change of hands,' signaling that existing shareholders have sold and new shareholders have bought those stocks. Such a change of hands suggests the possibility of a stock price trend reversal, and the influx of new shareholders could positively impact future stock prices. Investors need to meticulously analyze changes in trading volume to capture these trend reversal opportunities.

Market expectations are rising as the government's reorganization of ISA (Individual Savings Account) and a comprehensive review of the 'stock price manipulation prevention law' are underway, directed by the President. The ISA reorganization can encourage investment by providing tax exemption benefits to young investors, which could contribute to increasing market liquidity. Furthermore, the review of the stock price manipulation prevention law is expected to be discussed in a positive direction, aiming to prevent unreasonable stock price declines and ensure proper reflection of corporate value. Attention is focused on whether these policy changes will actually have a positive impact on the market.

Regarding the currently enforced 'stock price manipulation prevention law,' experts are criticizing it as a law that actually encourages stock price declines. Experts like Professor Seo Jun-sik pointed out that this law makes companies passive in managing stock prices and even has loopholes that allow them to exert only minimal effort to prevent prices from falling below a certain level. For example, a clause that requires stock price management only once every five years could lead companies to focus on short-term regulatory avoidance rather than long-term shareholder value enhancement. These problems raise questions about the law's effectiveness and highlight the need for a comprehensive review.