Despite strong US employment figures, increasing demand for semiconductors like AI and HBM, and stable exchange rates led to a rise in the index.
The KOSPI surged by more than 4%, reaching just shy of 7,000 points. Currently, it is only 5 points away from the 7,000-point threshold. This sharp increase is injecting a positive mood into the domestic stock market.
Despite better-than-expected US employment figures, the market did not react significantly. This is cited as one of the reasons why the market's response was limited despite interest rate hike concerns. The predominant analysis suggests that the strong employment figures were mainly due to seasonal factors in sectors like accommodation and food services.
As AI technology advances, computation and data processing volumes inevitably increase. The market once again highlighted that to meet this growing demand, not only Nvidia's GPUs but also high-capacity memory like HBM must see increased demand. Consequently, major semiconductor companies like Samsung Electronics and SK Hynix showed strong performance, with their stock prices surging by 5-8%.
This has restored the buying sentiment of foreign investors, who previously hesitated to make aggressive purchases due to concerns about exchange rate losses. The short-term strengthening of the won, reducing fears of further exchange rate drops, has positively impacted foreign investment attraction.
These buybacks serve as a factor that increases short-term stock price upside potential, contributing to market stability.
With the advent of the AGI (Artificial General Intelligence) era, the importance of Nvidia's products is further emphasized. Nvidia is solidifying its market position by stressing that its products are essential for all AI-related tasks, including AI inference and large language models. This serves to reconfirm the structural increase in demand for memory semiconductors.
This indicates that investors are placing more weight on long-term corporate fundamental improvements than on short-term interest rate variables.
Economic indicator uncertainties persist, with recent non-farm payroll figures significantly exceeding market expectations. Therefore, until macro indicators are confirmed, it is necessary to maintain caution by adjusting portfolio weight rather than engaging in aggressive investment.
This week will be somewhat important, as the CPI and PPI could indicate the Fed's direction. There's a reason we need to pay close attention right now.
Macro issues that dominated the market before, such as geopolitical risks, rising oil prices, and surging bond yields, intensified supply and demand pressures last week. However, the market's focus has now shifted from interest rate variables to corporate earnings. In particular, the prospect of increased AI capital expenditure by US big tech companies and the resulting rise in semiconductor demand are garnering market expectations.
US big tech companies are continuously expanding their capital expenditures (CAPEX), with projections indicating over 60% more investment next year than this year. This investment forms a structure that accompanies and expands demand for AI-related semiconductors such as GPUs, HBM, and general-purpose semiconductors. Consequently, high profit forecasts for memory semiconductor companies are expected to be a key driver for supply and demand recovery.
Foreign financial institutions like Goldman Sachs are also upgrading their earnings forecasts for the Korean stock market. The current market volatility could even present an opportunity for bottom fishing, making it a crucial time to focus on the solid fundamentals of major KOSPI stocks.
Analysis suggests that unless major global negative factors emerge, the likelihood of falling below previous lows is low. Therefore, a strategy of holding onto AI value chain and power equipment stocks remains effective.
The surge in the Philadelphia Semiconductor Index clearly demonstrates this improvement in semiconductor investment sentiment. Foreign investors perceive semiconductor growth as far more significant than interest rate risks.
Foreign investors engaged in buying for three consecutive trading days, an occurrence not seen since August 12. However, analysis suggests that the 'Sell Korea' position has not completely reversed. Share buybacks are not infinite, and from a foreign investor's perspective, the exchange rate merit is not yet sufficient. Therefore, a cautious approach of observing the market and refraining from increasing portfolio weight is needed for now.
If the inflation indicators to be released this week do not significantly deviate from expectations, the market is unlikely to experience a major shock. Rather, demand is likely to gravitate towards profit-generating companies like semiconductors, which the market is focusing on, thereby supporting the index. Conversely, if inflation exceeds expectations, a short-term market shock will be inevitable. Therefore, a strategy of reducing exposure to growth stocks and loss-making companies before the announcement is recommended, while a holding strategy remains effective for fundamentally strong stocks.
The semiconductor sector is primarily influenced by memory prices and shipment volumes rather than strength or weakness due to changes in the won's value. The impact of the exchange rate is expected to be reflected in third-quarter earnings, and unless there is a continuous decline in the exchange rate, its influence on investment sentiment is likely to be limited. In contrast, the automotive sector may face risk factors in its third-quarter earnings due to a depreciating exchange rate, necessitating a differentiated approach by industry.
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