[Good Morning Stock Market] Tesla's 'Bitcoin' Investment... Impact on Domestic Semiconductor Stocks?

[Asia Economy Reporter Ji Yeon-jin] On the 8th (local time), the U.S. stock market closed higher amid growing expectations for additional stimulus measures. In particular, news that Tesla allowed Bitcoin payments for its products triggered a thematic rally, with semiconductor and payment system-related stocks soaring. The domestic stock market is also expected to rise influenced by the U.S. market, although there are cautious voices regarding the additional U.S. stimulus package.

◆ Sangyoung Seo, Kiwoom Securities Analyst = According to documents submitted by Tesla to the stock exchange, the company announced a $1.5 billion investment in Bitcoin as a measure to provide greater flexibility to maximize cash earnings. Tesla also mentioned that it will begin accepting Bitcoin as a payment method for its products in the near future. However, concerns over increased earnings volatility due to potential losses from Bitcoin investment have spread, with some hedge funds issuing warnings, causing Bitcoin to briefly exceed $44,000.

Cryptocurrency-related stocks also showed strength. Tesla (1.31%) rose during the session following the Bitcoin investment news but partially gave up gains due to concerns over increased earnings volatility. Payment companies Square (8.15%) and PayPal (4.72%), as well as NVIDIA (6.24%), AMD (4.06%), shopping platform Shopify (4.45%), mining company Hut 8 Global (9.23%), and Riot Blockchain (40.25%) among other cryptocurrency-related stocks surged.

The Philadelphia Semiconductor Index rose 3.13%. Expectations for stimulus expansion boosted airline stocks such as Delta Air Lines (+5.08%) and energy stocks like ExxonMobil (+4.30%) following upgrades. Meanwhile, major tech stocks including Alphabet (-0.21%), Facebook (-0.57%), Amazon (-0.87%), and Apple (+0.11%) declined as selling pressure emerged after interest rate increases.

The Korean stock market showed nearly a 1% decline influenced by the automotive sector related to Apple Car and semiconductor stocks that had weakened in the U.S. market last week. During the session, banks and cyclical stocks rose on expectations of the Chinese Lunar New Year effect and additional U.S. stimulus, leading to a recovery. The overall market was characterized by differentiation due to changes in individual sectors. Similarly,

the U.S. market showed differentiation with semiconductor and cryptocurrency-related companies gaining strength due to Tesla's Bitcoin purchase effect, which is expected to lead to strength in semiconductor-related stocks in the Korean market.

Attention should be paid to the U.S. Treasury yields hitting a one-year high amid expectations for additional stimulus and spreading inflationary pressures. Although U.S. Treasury yields later reversed downward, this reflects optimism about economic normalization, which is favorable for the export-dependent Korean stock market. In particular, it raises expectations for strength in financial, cyclical, and large export stocks. Considering this, the Korean stock market is expected to start higher but show changes depending on individual companies and foreign futures trends ahead of the options expiration date.

◆ Hojung Kim, Yuanta Securities Analyst = The U.S. labor market continues to show sluggish trends. January ADP private employment increased by 177,000, raising hopes for employment improvement, but the Labor Department's results were disappointing. The January unemployment rate fell by 0.4 percentage points to 6.3% compared to the previous month, but the labor force participation rate declined.

The weak employment indicators could increase expectations for the Biden administration's $1.9 trillion economic stimulus package. The stimulus includes an extension of an additional $400 weekly unemployment benefit until September, further extensions of the Pandemic Emergency Unemployment Compensation (PEUC) program expiring in March, and the Pandemic Unemployment Assistance (PUA) program for self-employed workers expiring in April. Expectations for such stimulus should be limited to the period until the disease is controlled and intended to address potential shocks that may occur in the meantime. Excessive expectations for qualitative macroeconomic recovery due to the stimulus should be approached with caution.

From a long-term perspective, the passage of the $1.9 trillion stimulus could further increase the fiscal deficit, and the speed of interest rate increases due to future stimulus discussions could also be a burden. The total stimulus amount injected in five rounds last year was $3.4 trillion, about half of the total stimulus amount for the entire last year. The increase in household income is expected to exceed that of the CARES Act, which led to income and consumption rebounds after the pandemic. While everyday consumption remains difficult due to COVID-19, additional transfer payments may stimulate asset markets, and if asset markets show signs of overheating without accompanying qualitative recovery, it could become a burden for further policy implementation and market participants.