[Good Morning Market] Increased Volatility Centered on US Tech Stocks... Impact on Domestic Market?

[Image source=Yonhap News]

[Asia Economy Reporter Park Ji-hwan] The New York stock market plunged again after rebounding the previous day. In particular, the Nasdaq index, centered on technology companies, fell by nearly 2%. On the 10th (local time) at the New York stock market, the Dow Jones Industrial Average closed at 27,534.58, down 405.89 points (1.45%) from the previous day. The Nasdaq index closed at 1,919.59, down 221.97 points (1.99%) from the previous session.

Experts evaluate that the bubble controversy surrounding technology stocks, which had been supported by massive liquidity effects, increased market volatility. As seen in the U.S. stock market, the expansion of volatility in large technology stocks is expected to make investors focus on 'performance,' that is, current value, rather than future value accompanied by corporate dreams.

◆ Seo Sang-young, Kiwoom Securities Researcher = The U.S. stock market fell as volatility in technology stocks tended to expand again. Although stability was found the previous day raising expectations, the failure of the anticipated additional stimulus bill vote in the U.S. Congress dampened investor sentiment, leading to selling mainly in large technology stock groups that had seen significant gains. In particular, if the U.S. additional stimulus is delayed, the possibility of sluggish U.S. exports due to poor sales during the year-end shopping season is high, which is expected to burden the Korean stock market.

Additionally, Nikola plunged after Hindenburg Research, which mainly released materials on accounting fraud and management investigations, claimed to have evidence of 'fraud.' This movement also burdened the investment sentiment of technology stocks that had driven the recent gains. The market had surged due to liquidity, but many stocks had risen based on dreams rather than actual corporate value. However, attention should be paid to the fact that with the recent expansion of volatility in large technology stocks and reports from Hindenburg Research, investors may now focus more on corporate value. This potential change in investor psychology is expected to make the Korean stock market focus more on current corporate value rather than future value.

◆ Lee Jae-sun, Hana Financial Investment Researcher = Despite the adjustment in U.S. technology stocks, the domestic stock market showed remarkable strength in the IT sector. Foreign investors showed a net buying preference for the IT sector worth 1.2 trillion won, the second largest since March. The improvement in IT sector supply and demand was driven by individual positive factors in the semiconductor sector. Samsung Electronics' successive order announcements and expectations of benefits related to foundry amid U.S.-China conflicts acted as major upward factors. Some indicators also showed improvement. DRAM spot prices rebounded starting at the end of August. From a macro perspective, whether foreign investors continue to buy semiconductors will depend significantly on the sustainability of COVID-19 spread control and the direction of the Korean won accordingly.