[MarketING] Top Market Cap Stocks Soar as Fading Anxiety Lifts Sentiment

KOSPI and KOSDAQ Both Rise Over 1%
Top Market Cap Stocks Lead Index Gains Amid Eased Concerns

[Image source=Yonhap News]

The KOSPI and KOSDAQ both closed with gains of over 1%. The KOSPI recovered to the 2400 level, while the KOSDAQ regained the 810 level. The rise in market capitalization leaders broadly supported the index gains. With concerns over risks in the banking sector somewhat easing, the direction of the stock market is expected to be determined by the results of the U.S. Federal Open Market Committee (FOMC) meeting for March, to be announced in the early hours of the 23rd (Korean time).

KOSPI Rises Above 2400 Level for the First Time in 7 Trading Days

On the 22nd, the KOSPI closed at 2416.96, up 28.61 points (1.20%) from the previous day. The KOSDAQ ended the day at 813.43, up 10.90 points (1.36%).

The rise in the indices was led by a broad rally among the top market capitalization stocks. On the Korea Exchange, Samsung Electronics rose 1.33%, LG Energy Solution 4.95%, SK Hynix 3.95%, Samsung Biologics 0.12%, Samsung SDI 2.09%, LG Chem 3.84%, Hyundai Motor 2.56%, NAVER 3.24%, Kia 1.54%, and Kakao 2.96%. On the KOSDAQ, except for HLB (-1.84%) and SM Entertainment (1.32%), the top 10 by market cap all closed higher. Ecopro BM rose 4.40%, Ecopro 7.86%, Celltrion Healthcare 2.33%, L&F 5.51%, Celltrion Pharm 2.34%, Kakao Games 3.29%, Osstem Implant 0.86%, and Pearl Abyss 5.15%.

Semiconductor and secondary battery stocks showed particularly strong gains. Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "Due to Tesla's sharp rise, domestic secondary battery stocks showed synchronized movement, and the U.S. CHIPS Act guardrail provisions were assessed as avoiding the worst for domestic semiconductor companies, which was reflected in the semiconductor stocks' strength."

International credit rating agency Moody's upgraded Tesla's long-term investment grade from 'Ba1' to 'Baa3' on the 20th (local time) and revised the outlook to 'stable.' Moody's classifies Baa3 and above as investment grade. Moody's explained that this rating adjustment reflects expectations that Tesla will remain one of the top electric vehicle manufacturers due to its global business expansion and high profitability. Moody's also forecasted a 34% year-on-year increase in Tesla's vehicle deliveries this year. With the upgrade from junk to investment grade, Tesla's stock price surged significantly. Tesla rose 7.82% in the U.S. stock market the previous day.

The detailed guardrail provisions of the CHIPS Act announced by the U.S. Department of Commerce the previous day were assessed as avoiding the worst-case scenario, leading to a rise in domestic semiconductor stocks. The key point of the guardrail details is that advanced semiconductor factories can expand production capacity within a 5% range. The semiconductor law prohibits substantial expansion of semiconductor production capacity in China for 10 years if receiving U.S. subsidies, but the detailed regulations specify conditions, somewhat easing the restrictions. Choi Yoo-jun, a researcher at Shinhan Investment Corp., explained, "The detailed U.S. semiconductor law eased the restrictions on Korean companies' capacity expansion in China more than expected," adding, "Expectations for further negotiations were also reflected, leading to a rebound in semiconductor stocks."

Additionally, the passage of the 'Tax Incentive Limitation Act Amendment (K-Chips Act)' through the National Assembly's Planning and Finance Committee on the same day positively influenced semiconductor stocks. The amendment expands the tax credit rate for facility investments in national strategic technologies such as semiconductors from 8% to 15% for large and medium-sized enterprises and from 16% to 25% for small and medium-sized enterprises.

Stock Market Direction Expected to Be Determined by FOMC Results

With concerns over banking system instability somewhat easing, market attention is now focused on the March FOMC results.

Researcher Choi said, "Unlike the previous day, despite awaiting the FOMC, the domestic stock market closed strong," analyzing, "Recent moves to resolve the situation have contained risk spread, and although contagion risk is considered, this has been perceived as narrowing the scope for further tightening."

Attention should be paid to the dot plot (interest rate path) and remarks by Jerome Powell, Chair of the U.S. Federal Reserve, at this FOMC. Researcher Kim said, "The market expects this FOMC to be the last 25 basis point (1bp=0.01 percentage point) rate hike, with rate cuts beginning in earnest in the second half of the year," adding, "In that sense, the dot plot and Chair Powell's remarks are important, especially his answers on how to achieve future price stability and financial stability after resolving the recent banking crisis."

Kim Il-hyuk, a researcher at KB Securities, explained, "Concerns that financial instability could affect the real economy are raising expectations for rate cuts not only this year but also next year," adding, "Economic forecasts are expected to be revised at this FOMC, and the key is whether the upward revision cycle of the dot plot will end."