[MarketING] KOSPI Recovers to 2550 Level Amid Strong Performance of Top Market Cap Stocks

KOSPI Rises for 6th Consecutive Day
Most Top Market Cap Stocks Trending Upward

The KOSPI continued its upward trend for the sixth consecutive day, recovering the 2550 level in early trading. Market capitalization leaders, centered around semiconductors, rose evenly, driving the KOSPI's recovery to the 2550 level. As the semiconductor rebound gains momentum and returns as a leading sector, opinions suggest that new capital inflows are necessary for the KOSPI to break through the upper resistance in the future.

KOSPI rises for 6th day... Market cap leaders show strength

As of 10:25 AM on the 22nd, the KOSPI was at 2558.12, up 20.33 points (0.80%) from the previous day. The KOSDAQ rose 5.00 points (0.59%) to 846.72.

[Image source=Yonhap News]

Although the U.S. stock market closed lower last Friday due to a deadlock in the debt ceiling negotiations and profit-taking selling, the domestic market is interpreted as showing an upward trend due to the resumption of debt ceiling talks and Federal Reserve (Fed) Chair Jerome Powell's indication of a pause in interest rate hikes. On the 19th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 0.33%, the S&P 500 dropped 0.14%, and the Nasdaq declined 0.24% compared to the previous day.

Han Ji-young, a researcher at Kiwoom Securities, explained, "Despite Chair Powell's indication of a pause in rate hikes on the 19th, the U.S. stock market closed slightly lower due to the suspension of debt ceiling negotiations and renewed concerns about regional banks. Recently, Fed officials such as the Vice Chair and regional bank presidents have kept the possibility of a June rate hike open, causing confusion in the market, but Chair Powell suggested that it may not be necessary to raise rates further to achieve the inflation target."

In a discussion with former Fed Chair Ben Bernanke on the 19th, Chair Powell noted that inflation remains much higher than the Fed's target, but due to increased lending conditions caused by banking risks, it may not be necessary to raise rates as much as the target, implying a rate freeze. Following Powell's remarks, the probability of a June rate hike at the Chicago Mercantile Exchange (CME) FedWatch dropped from the mid-30% range to the mid-15% range.

Over the weekend, negotiations between the U.S. White House and Republicans on raising the national debt ceiling repeatedly stalled and resumed, causing difficulties. This renewed uncertainty negatively affected the U.S. stock market. However, after U.S. President Joe Biden and House Speaker Kevin McCarthy spoke by phone on the 21st and agreed to resume the deadlocked debt ceiling negotiations, the negative impact of the debt ceiling on the domestic market appears to have been mitigated.

Han said, "This week, the debt ceiling issue may continue to dominate headlines in market news flow, potentially causing stock price volatility, but it is not a factor that influences the direction of stock prices, so it is necessary to avoid reacting by reducing positions due to debt ceiling uncertainty." She added, "It is appropriate to consider potential phenomena that may arise after the debt ceiling increase, such as rising interest rates due to increased government bond issuance and potential economic slowdown due to reduced fiscal spending."

Even if the negotiations are settled, it is expected not to be a major positive for the stock market. Jo Jun-gi, a researcher at SK Securities, said, "The possibility of an actual default is extremely limited, but since the parties' desired directions are sharply divided, the negotiations are likely to continue until the last minute. Despite the debt ceiling negotiations not being completed, the market rose quite strongly last week, which can be interpreted as having priced in a high likelihood of settlement, so even if the negotiations conclude, the market is unlikely to show a strong rally from the resolution of uncertainty."

Market cap leaders rise centered on semiconductors

Market capitalization leaders, centered on semiconductors, are rising evenly, leading the KOSPI's gains. Among the top 20 KOSPI market cap stocks, 18 are rising except for Kakao and LG. Kakao is down 0.17%, and LG is flat.

The semiconductor sector continues its strength. Samsung Electronics rose 0.58% from the previous session, extending its gains for the third day, and SK Hynix rose 1.85%, continuing a five-day consecutive rise.

A researcher said, "During the week, attention is expected to focus on whether the momentum of large semiconductor stocks and materials, parts, and equipment (SoBuJang) stocks in the domestic market will continue. The semiconductor sector's upstream demand is directly linked to macroeconomic conditions such as consumer spending in major countries like the U.S. Although the macro environment is currently uncertain, factors other than macro, such as AI industry growth, expectations of passing the earnings bottom, and low supply-demand pressure, seem to be creating a favorable environment for these stocks."

Attention is expected to focus on Nvidia's earnings scheduled for this week. Semiconductor stocks rose last week on Nvidia-related positive news, so Nvidia's earnings are also expected to have an impact. Nvidia will announce its first-quarter earnings on the 24th. Researcher Jo said, "Nvidia, regarded as a leader in the AI boom and having recorded about a 120% return since the beginning of the year, will be closely watched to see if its future outlook can further strengthen the recently improved semiconductor investment sentiment."

Opinions suggest that new capital inflows are necessary for the KOSPI to break through the upper resistance further. Choi Yoo-jun, a researcher at Shinhan Investment Corp., said, "Recently, semiconductors have regained momentum as a leading sector, driving the KOSPI's rise, but there is concern about the possibility of breaking through the upper resistance in the future. Although the market cap weight of semiconductors is rising, the market cap weight of other sectors is decreasing, and with customer deposits continuing to decline since May, if new capital does not flow in, the KOSPI's upper resistance will be constrained, and the price gap between semiconductors and other sectors will widen."