[Market ING] KOSPI: Interest Rate Pressure vs. Shareholder Return Expectations

Weekly KOSPI Projected Range: 6,400–7,500

Last week, the KOSPI failed to secure the 7,000 mark due to interest rate pressures and other factors. For the time being, the market is expected to see a tug-of-war between interest rate anxiety and expectations for shareholder returns, with investor attention likely to focus on Nvidia's earnings announcement this week.

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Last week, the KOSPI fell by 0.93% and the KOSDAQ declined by 0.18%. Jae Won Lee, a researcher at Yuanta Securities, commented, "Although the KOSPI managed to break through the 7,200 mark thanks to strong performance in the semiconductor sector, U.S. fiscal concerns, long-term interest rates, and instability in the Middle East served as triggers for profit-taking." He further analyzed, "Nevertheless, expectations for semiconductor earnings and announcements regarding shareholder return initiatives provided support for the lower end of the index."

For the time being, the market is likely to continue to see a push-and-pull between interest rates and shareholder returns. Lee noted, "In the current environment, interest rates are acting as a ceiling, while shareholder returns are supporting the floor. While the rise in long-term interest rates and oil prices are already familiar negatives, any additional increases could put further pressure on foreign capital inflows and valuations."

Jongmin Kim, a researcher at Samsung Securities, commented, "With the second-quarter earnings season coming to an end and a lack of major events on the horizon, two key factors are expected to dominate the market: the direction of long-term interest rates from a macro perspective and each company's shareholder return policy from a micro perspective." He predicted, "For the time being, the stock market will likely go through a tug-of-war phase, with upward pressure on rates from macroeconomic factors countering optimism about shareholder returns on the microeconomic side."

Within this context, market attention is expected to be drawn to Nvidia's earnings announcement scheduled for this week. Nvidia is set to release its results on August 27. This earnings release will be important in assessing whether there is an upward revision to next quarter's guidance, Nvidia's ability to defend its gross profit margin, the ramp-up of Blackwell and shipment prospects for Rubin, and how effectively Nvidia’s newly announced AI financial platform can attract external investment while limiting direct financial burdens on the company. Kyungmin Lee, a researcher at Daishin Securities, stated, "Nvidia's earnings announcement could become an inflection point for AI investment sentiment. As the recent results from big tech companies continue to bolster trust in the AI investment cycle, Nvidia’s strong earnings and positive guidance could improve sentiment toward AI and semiconductors overall and serve as a trigger for a second rally in the stock market." He added, "However, it is also possible that, due to continued external uncertainty, even improved earnings may not provide strong upward momentum."

With interest rate pressures affecting the market, the Jackson Hole meeting will also be closely watched. Lee explained, "Given that the July Federal Open Market Committee (FOMC) minutes confirmed persistent inflation concerns within the U.S. Federal Reserve, it will be important to observe Chair Kevin Warsh's commentary on inflation and views regarding further rate hikes at Jackson Hole. If the Personal Consumption Expenditures (PCE) Price Index again confirms easing inflation and caution regarding monetary policy subsides, there is a high probability that yields on U.S. Treasury bonds will stabilize and preference for risk assets will strengthen."

Junghwan Na, a researcher at NH Investment & Securities, stated, "Should Nvidia's results confirm a continued AI cycle and the Jackson Hole event help subdue U.S. bond yield volatility, valuation normalization will likely persist. If the KOSPI settles in the 7,000 range, a strategy that broadens exposure to non-semiconductor sectors where AI monetization is reflected in actual earnings will be effective." NH Investment & Securities forecasted the KOSPI's expected band for this week at 6,400 to 7,500.

Key events this week include the U.S. Conference Board Consumer Confidence Index for August to be released on August 25, the U.S. July PCE Price Index and new orders for durable goods for July on August 26. On August 27, the Bank of Korea Monetary Policy Board will convene, and the Jackson Hole meeting is scheduled from August 27 to August 29.

Researcher Kyungmin Lee noted, "Currently, according to consensus estimates, July's PCE and core PCE are expected to rise by 3.6% and 3.3%, respectively, year-on-year, which is similar to June levels." He emphasized that it is important to see whether the trend of moderating inflation persists.

This content was produced with the assistance of AI translation services.