91 Trillion Won Overhead Supply Limiting KOSPI Rise

Analyst Vincent stated, "It rose 29% in August compared to its low point."

However, due to the impact of heavily declined stocks like Samsung Electronics and SK Hynix, investors' perceived gains were relatively lower.

Analyst Vincent mentioned, "We believe a root rebound has begun. I think there will be a certain period of consolidation," suggesting the possibility of adjustment within a value trap rather than an extended upward trend.

Samsung Electronics and SK Hynix are below 4x, which is very low compared to Micron (6.5x) and CXMT (20x). Analyst Vincent said, "Firstly, it's cheap. The KOSPI's valuation is five times."

However, the 91.6 trillion won in net buying by retail investors has accumulated as an overhead supply on the KOSPI, posing a significant burden on its rise. Analyst Vincent added, "These are individual net buying outstanding amounts. The overhead supply accumulated above, I calculated, is 91.6 trillion won."

Currently, trading volume in the domestic stock market has decreased significantly. In August, an average daily purchase of 600 billion won by other corporations (treasury shares) was the only source of supply. Analyst Vincent explained, "The only thing buying right now is treasury shares. Trading volume has decreased drastically."

Since treasury share buybacks are a corporate obligation, there are limits to continuous supply expansion, indicating a reduction in overall market participation.

Key events are scheduled for September that will determine the market's direction. Analyst Vincent stated, "September has the FOMC interest rate decision. And then around September 24th, during our Chuseok holiday, there will be US-China talks."

In addition, the countdown to the US midterm elections and data center-related issues are expected to act as major variables in the September stock market.

Historically, September is the weakest month for the US stock market, especially the S&P 500 index. Analyst Vincent explained, "Historically, the US S&P is weakest in September."

In midterm election years, years when the Fed chair changed, and during periods of interest rate hikes, September has consistently shown weak performance without exception.

Due to these seasonal effects on the US stock market, the Korean stock market is also highly likely to experience a challenging September.

The sustained high interest rates, reducing the attractiveness of stocks compared to safe assets, also pose a burden.

Analyst Vincent pointed out, "If it reaches around 20 times, considering the opportunity cost, who would take the risk to invest in stocks?"

This is a major factor reducing the incentive for stock investment from the perspective of managing large-scale portfolios.

In the past, there have been instances where stock prices rose during periods of high interest rates. Analyst Vincent mentioned, "Looking at the past, there have been cases where stock prices rose during periods of high interest rates."

This can be seen in the late 80s, mid 90s, and recent cases, where rising interest rates did not necessarily lead to stock price declines when accompanied by strong economic performance and productivity improvements.

Analyst Vincent explained, "Meta is funding in Korea... without people knowing, the entities building data centers in the US are also funding in Korea."

This suggests a less efficient situation than raising funds within the US and indicates exposure to market volatility risks.

This, along with exchange rate volatility risks from won-denominated funding, means that in a period of inflation and interest rate hikes, these companies' debt burden and interest rate sensitivity are intensifying, increasing investment risk.

Market attention is focused on the US-China summit scheduled for September 24th. The US and China are currently engaged not only in AI technology competition but also in funding competition. Analyst Vincent mentioned, "Currently, the US and China are competing in AI technology. But they are also competing in funding."

He defined the current era as "not an era of excess savings, but an era of surging investment," suggesting the possibility of converging interests between the US, which needs long-term capital, and China, which needs investment destinations.

This interest rate differential, amounting to approximately 3 percentage points, is an unprecedented level of imbalance historically, interpreted as reflecting instability in global financial markets.

Analysis suggests that US-China relations have crossed a 'point of no return,' posing a significant threat to the Korean semiconductor market. Analyst Vincent emphasized, "It seems more important that the US and China have crossed an uncrossable river."

Concerns about market disruption are growing as Chinese companies are accelerating their technological pursuit by releasing new products in advanced memory technology fields like HBM, even disregarding yield rates. While this technological approach may be far from commercialization, the continuous catch-up, combined with China's export competitiveness observed in the past EV market, is causing fear in Korea.

Analyst Vincent explained, "Governor Abbott of the Republican Party, driven by votes, is delaying fast-tracking data center construction and suggesting various reviews."

With delays in data center construction fast-tracking due to inflation and other reasons, red flags are appearing for related companies like Nvidia, and negative impacts on memory semiconductor demand are feared.

The outcome of the Senate election in this US midterm election is crucial, and the trends in Texas, a Republican stronghold, are noteworthy. Analyst Vincent emphasized, "Ultimately, the Senate election is the most important part of this US midterm election, and where the seats go is very important."

Texas faces higher concerns about economic deterioration and inflation compared to other states, with severe financial hardship among the middle and lower classes, contrary to official indicators.

The direction of the war and inflation are acting as key market variables. Analyst Vincent said, "However, if there's even a slight possibility of reconciliation, the market always has the potential for a sharp rebound."

However, if oil prices continue to rise, the Fed will be forced to adopt a hawkish stance, which would negatively impact the midterm election results and increase market uncertainty.

After a strong semiconductor rally, primarily led by Samsung Electronics and SK Hynix in May and June, the domestic stock market entered a period of after-effects. Analyst Vincent explained, "After the strong semiconductor rally in May and June, primarily led by Samsung Electronics and Hynix, we entered a period of after-effects."

With the government's willingness to boost the stock market being pushed down the priority list, there's a lack of active policy considerations or support compared to the past. This analysis suggests that market dynamism is reduced, leading to investor exodus or decreased interest, and recovery will take a considerable amount of time.

The US economy is suggested to peak and slow down in the first half of next year. Analyst Vincent said, "If the Iran war is longer than expected, oil prices don't fall as expected, and the US economy declines after the election, it's not about avoiding a shower but possibly moving to a different place for a while."

Currently, it's a time to accept period adjustments and strengthen portfolios, but if the US economy declines, a short-term exit should also be considered. He maintained the view that a rebound in leading stocks is essential for an ultimate upward trend.