[Good Morning Market] US Rate Surge Eases... KOSPI Expected to Attempt Rebound

Amid significant turbulence in the domestic stock market caused by a steep decline in Samsung Electronics shares the previous day, it is expected that the KOSPI will attempt a rebound. This outlook is based on the view that the downturn in U.S. semiconductor stocks has already been priced into the market and that the recent rise in interest rates is showing signs of easing.

On August 24 (local time), the Dow Jones Industrial Average on the New York Stock Exchange closed at 53,417.16, up 0.26% from the previous trading day. In contrast, the S&P 500 Index fell 0.28% to 7,652.86, while the Nasdaq Index dropped 0.76% to 25,980.19. The Philadelphia Semiconductor Index tumbled 2.70%.

Semiconductor stocks dragged the market down. Nvidia fell by 2.91%, Micron declined by 5.83%, Broadcom slid 2.63%, and AMD lost 3.49%. In particular, Nvidia continued its losing streak for a seventh consecutive session, raising caution among investors ahead of its earnings announcement later this week.

Kiwoom Securities analyzed that the simultaneous decline in global semiconductor stocks the previous day had more to do with supply-demand volatility driven by 'sell-on-news' following Samsung Electronics' shareholder return announcement and preemptive position adjustments ahead of Nvidia's earnings release, rather than any deterioration in fundamentals.

The domestic market was also hit hard by semiconductor stocks. The previous day, the KOSPI plummeted 3.12% to close at 6,696.96. Samsung Electronics plunged by 8.7% following its shareholder return policy announcement, leading to weakness in both the semiconductor and insurance sectors. In contrast, the KOSDAQ rose 1.42% to 813.33, demonstrating a rotation toward small- and mid-cap stocks.

The sharp decline in Samsung Electronics shares is believed to have resulted from the gap between the level of shareholder returns anticipated by the market and the actual announcement. Samsung Electronics stated its intention to allocate 50% of its free cash flow (FCF) to shareholder returns. However, with investors hoping for large-scale share buybacks and cancellations, disappointment resulted in selling pressure. Furthermore, compared to SK hynix, which earlier announced that it would allocate more than 50% of its free cash flow to shareholder returns, Samsung Electronics' plan was seen as relatively less aggressive.

Nonetheless, analysts maintain that the scale of shareholder returns by both Samsung Electronics and SK hynix still serves as a supply-demand safeguard for the domestic market. Samsung Electronics' shareholder return program is expected to total between 90 trillion and 110 trillion won, while SK hynix is predicted to add 40 trillion won or more. Given that there are still no concrete signals of weakening fundamentals in the semiconductor sector—such as in memory prices or profit outlooks—the recent sharp declines are considered unlikely to signal a sustained downtrend at this stage.

On the contrary, some point out that the internal strength of the market has improved compared to before. Despite the plunge in the KOSPI the previous day, 579 stocks advanced while 286 declined. In August so far, the average difference between the number of gaining and losing stocks has remained positive at 91. This contrasts with the negative gaps of minus 151 in June and minus 34 in July, indicating that excessive polarization in the market is easing.

By sector, non-ferrous metals advanced by 7.8%, information technology (IT) electronics gained 6.0%, and chemicals rose by 5.1%, with 18 out of 20 sectors posting gains except semiconductors and insurance. The KOSDAQ and other small- and mid-cap stocks also showed strength. Unlike the broad sell-off across most sectors during the July slump, recent trading has seen sector rotation and differentiation, increasing the resilience of the stock market’s downside.

Stabilization in U.S. interest rates and oil prices is another positive factor. The U.S. 10-year Treasury yield fell 3.8bp from the previous session to 4.696%, while the 30-year yield declined 4.5bp to 5.226% (1bp=0.01 percentage point). West Texas Intermediate (WTI) crude dropped 2.35% to $85.01 per barrel. The recent spike in long-term bond yields—previously a source of concern for the market—has also subsided, as there is speculation that the U.S. Treasury could use its Treasury General Account (TGA) balances to buy long-term Treasuries.

Consequently, the domestic stock market is expected to attempt a partial rebound from the previous day's sharp losses. An increasing perception that the correction in U.S. semiconductor stocks has already been factored into the domestic market, combined with falling rates and oil prices and possible bargain hunting in recently depressed semiconductor stocks, could support such a move.

Ji-Young Han, researcher at Kiwoom Securities, commented, "Yesterday's downward pressure on the market was a short-term factor created by supply-demand volatility sparked by 'sell-on-news' following Samsung Electronics' shareholder return announcement and caution ahead of Nvidia's earnings, rather than a sign of fundamental cracks. As the likelihood of further macroeconomic headwinds such as higher rates and oil prices diminishes, there is little need to further reduce equity exposure at this point."

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