[Good Morning Stock Market] "Despite FOMC Relief, US 3 Major Indexes and Semiconductor Index Fall... KOSPI Also Under Pressure"

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Despite relief over the favorable July FOMC minutes, all three major U.S. stock indices closed lower the previous day. The Dow Jones fell by -0.5%, the S&P 500 by -0.72%, and the Nasdaq by -1.25%.

The July FOMC minutes released that day mentioned the need to maintain high interest rates to firmly keep inflation in the 2% range, reflecting concerns about entrenched high inflation and a commitment to price stability. However, the minutes also included language stating that "policy adjustments should be data-dependent regarding their impact on the economy, and at some point, it would be appropriate to slow the pace of rate hikes," which limited excessive tightening concerns.

By sector, all sectors except energy (0.8%) declined. The smallest drops were seen in utilities (-0.2%) and consumer staples (-0.2%), while the largest declines were in telecommunications (-1.8%), materials (-1.4%), and consumer discretionary (-1.1%). The consumer staples sector, which had shown strength due to strong performances by Walmart and Home Depot the previous day, weakened due to disappointing Q2 earnings from Target (-2.7%) and Lowe's (-0.56%), impacted by rising transportation and labor costs. The Philadelphia Semiconductor Index fell over 2%, with selling pressure in semiconductor stocks such as Nvidia (-2.88%), Micron (-3.51%), and AMD (-1.93%).

◆ Han Ji-young, Kiwoom Securities Analyst: "Lack of Momentum as Q2 Earnings Season Ends... Sectoral Differentiation Expected"

On the 18th, the Korean stock market is expected to show a weak trend influenced by the U.S. market correction, including the Philadelphia Semiconductor Index (-2.5%), despite the July FOMC minutes. Additionally, with the end of the Q2 earnings season, the absence of earnings momentum and technical resistance at the 120-day and 20-week moving averages are expected to be short-term burdens. Therefore, as rebounds are likely to be limited mainly to large-cap stocks today, a differentiated market by sector and size is anticipated. Furthermore, from the perspective of recent popular themes such as solar power, shipbuilding, secondary batteries, and defense, short-term valuation pressures may trigger rotation, so caution is needed regarding increased volatility in related stock groups.

◆ Kim Seok-hwan, Mirae Asset Securities Analyst: "Impact of Philadelphia Semiconductor Index Decline... KOSPI Expected to Open Down Around 0.5%"

The KOSPI index is expected to open down around 0.5%.

Recently, negative outlooks on major U.S. semiconductor and semiconductor equipment companies have spread concerns about the domestic semiconductor industry. Analog Devices (ADI), which reported quarterly earnings the previous day, posted strong results but still fell over 5% amid concerns about future demand slowdown. As a result, major companies such as Nvidia, Micron, and Applied Materials saw their stock prices fall consecutively, causing the Philadelphia Semiconductor Index to drop by 2.5%. Consequently, selling pressure on domestic semiconductor leaders Samsung Electronics and SK Hynix is likely to intensify in today's market.

According to global IT research firm Gartner, the global semiconductor companies' revenue growth forecast for 2022 was sharply revised down from 14% year-over-year three months ago to 7.4%. A decline of 2.5% is expected in 2023. TrendForce projects that next year's DRAM demand will increase by 8.3%, while supply will rise by 14.1%, resulting in the lowest growth rate ever recorded. This is expected to lower expectations for the semiconductor industry, which is a key export sector for Korea. Already, in July, domestic technology exports decreased for the first time in about two years, largely due to a slowdown in semiconductor memory exports. Additionally, according to Statistics Korea, domestic semiconductor inventory is expanding at the fastest pace in six years since April 2016.