[Good Morning Stock Market] Semiconductor Stocks to Remain Strong... Differentiated Market Trend Continues

[Asia Economy Reporter Lee Seon-ae] On the 28th, the domestic stock market is expected to show a solid performance.

Seosangyoung, a researcher at Mirae Asset Securities, noted, "The weakness in technology stocks in the U.S. stock market is mainly due to the likely downturn in software, COVID-19 vaccine, and diagnostic sectors, which had seen significant gains previously, so this deserves attention." He added, "However, Micron's 1.53% rise ahead of its earnings announcement on expectations of improved results is a positive factor. Considering this, the Korean stock market is expected to start slightly lower but will maintain strength centered on semiconductor stocks, showing a solid performance."

In particular, the sector that saw concentrated net buying by foreigners the previous day was also the semiconductor industry. This is why a strong performance in related stocks is expected today as well. Additionally, international oil prices continue to rise, and the U.S. Russell 2000 index increased by 1.46%, among other positive factors for foreign demand, which is also favorable.

Han Ji-young, a researcher at Kiwoom Securities, said, "Considering the expectations for With-Corona, and the stock price strength driven by the improved semiconductor industry outlook from Micron in the previous trading day in the U.S., the domestic economy normalization and semiconductor sector are expected to show positive stock price trends." She added, "Although the KOSPI's upper limit has been constrained recently, the possibility of being trapped in a long-term box range is low, given foreigners' net buying of large-cap stocks with improving earnings such as semiconductors and the easing of the won/dollar exchange rate's sharp rise."

She continued, "While sectors related to economic normalization will show strength influenced by rising U.S. interest rates, a differentiated market is expected to unfold. Some eco-friendly growth stocks, which have seen relatively strong price increases, may face profit-taking pressure, so caution is needed."

Expectations for reopening are gradually being reflected in the stock market. Expectations for earnings improvements by theme sectors have also increased. Unlike cyclical sectors whose momentum has weakened since the end of August, the 2021 earnings consensus for reopening-related sectors (transportation, hotel/leisure, media, food and beverage, distribution) continues to rise. An increase in the 2022 earnings consensus is also observed, and the influence of these sectors on the overall KOSPI operating profit next year is expected to expand. The stock price burden of related sectors is relatively low. Their market capitalization proportion within the KOSPI is also at its lowest level in five years.

Lee Jae-seon, a researcher at Hana Financial Investment, said, "Until the government announces a specific timeline and strategy for With-Corona, a selective approach focusing on sectors with visible earnings improvements among reopening sectors is necessary." He added, "Among related sectors, transportation is the first to show visible earnings improvements, and the detailed subsector leading the upward revision of transportation sector earnings in Q3 is airlines, which have recently shown favorable foreign demand."

Meanwhile, the U.S. stock market showed mixed results. On the 27th (local time) at the New York Stock Exchange, the Dow Jones Industrial Average, which gathers blue-chip stocks, closed at 34,869.37, up 0.21% from the previous trading day. In contrast, the large-cap-focused Standard & Poor's (S&P) 500 index closed down 0.28% at 4,443.11. The tech-heavy Nasdaq index fell 0.52% to 14,969.97.

The factor influencing the stock market was the government bond yield. The U.S. 10-year Treasury yield started at 1.465% that day and rose to 1.517% during trading, marking a three-month high. As the bond yield level rose, investor sentiment declined. The 10-year Treasury yield closed near 1.484%, about 3 basis points (0.03%) higher than the previous session.