Advanced 'Austerity Clock'... "Semiconductors as a Safe Haven Amid Dollar Strength"

[Asia Economy Reporter Ji Yeon-jin] As the dollar continues to strengthen, stock market volatility is expected to further increase until early next year. Experts pointed out semiconductor stocks as a safe haven, as significant investment plans have recently emerged in the semiconductor sector, which has been experiencing supply shortages.

According to the financial investment industry on the 22nd, the Dollar Index reached a year-to-date high of 96 points on the 19th (local time). The dollar's strength continued amid concerns over much steeper tightening, with more than two interest rate hikes by the U.S. Federal Reserve (Fed) expected next year. Although foreigners have turned to net buying in the KOSPI market this month, the strong dollar is identified as a factor that could increase stock volatility. Lee Jae-man, a researcher at Hana Financial Investment, pointed out, "Due to the Dollar Index hitting a record high, confidence in the sustainability of foreign net buying is not very strong."

Initially, the market expected the Fed's bond purchases, a major pillar of global liquidity supply, to end around June next year. However, after Fed Vice Chair Richard Clarida stated on the 19th (local time) that "the tapering (asset purchase reduction) pace should be accelerated," strong inflation responses have led to forecasts that the tapering end date could be moved up to April or May. Vice Chair Clarida (born 1957), Treasury Secretary Janet Yellen (born 1946), and Fed Chair Jerome Powell (born 1953) all belong to the generation that experienced the ‘killer inflation’ caused by the 1970s Middle East oil shock, which means they may respond more sensitively to inflation. In fact, the probability of a U.S. rate hike in July next year rose to 77% in the U.S. federal funds futures (FF) market, with the probability of two or more hikes reaching 27%.

Park So-yeon, a researcher at Shin Young Securities, said, "Inflation will trigger investments in areas with shortages," adding, "The Japanese government has allocated an additional budget of 774 billion yen for stable semiconductor supply, and with GM and Ford announcing their entry into automotive semiconductors and Samsung Electronics expanding investment by building a second plant in the U.S., semiconductors could become a safe haven."