[MarketING] The Heavy Uncertainty Too Much for Semiconductors to Bear Alone

KOSPI Slightly Rises, KOSDAQ Falls... Mixed Close
Samsung Electronics Returns to '70,000 Won' Level After 1 Year and 2 Months

The KOSPI rebounded after a day of decline. The index was driven up by strong performance in semiconductors, but concerns over the debt ceiling negotiations and cautious sentiment ahead of the release of the U.S. April Personal Consumption Expenditures (PCE) price index limited the gains. The KOSDAQ closed lower due to foreign selling pressure.

KOSPI Turns Upward After a Day... Slightly Firm

On the 26th, the KOSPI closed at 2,558.81, up 4.12 points (0.16%) from the previous day. The KOSDAQ ended the session at 843.23, down 4.49 points (0.53%).

[Image source=Yonhap News]

Foreign investor flows split the fortunes of the KOSPI and KOSDAQ. On the day, foreigners were net buyers of 910.5 billion KRW in the KOSPI market but net sellers of 21.1 billion KRW in the KOSDAQ market. Individual investors sold 412.9 billion KRW in the KOSPI market but bought 33.4 billion KRW in the KOSDAQ market. Institutions were net sellers of 505.1 billion KRW in the KOSPI market and 14.9 billion KRW in the KOSDAQ market.

Seokhwan Kim, a researcher at Mirae Asset Securities, said, "NVIDIA's earnings surprise and optimistic outlook on the future development of the artificial intelligence (AI) industry, along with concentrated foreign buying, sustained the rise in semiconductor stocks. However, the KOSDAQ turned downward due to weakness in secondary battery stocks and foreign selling. The KOSPI's gains were also limited ahead of the holiday due to uncertainties over the U.S. debt ceiling," he analyzed.

Samsung Electronics recovered to the 70,000 KRW level for the first time in about 1 year and 2 months since March 29 last year (70,200 KRW) based on closing prices. On the day, Samsung Electronics closed at 70,300 KRW, up 2.18% from the previous day. SK Hynix closed at 109,200 KRW, up 5.51%. Samsung Electronics continued its rise for three consecutive days, and SK Hynix for two consecutive days.

Jungwhan Na, a researcher at NH Investment & Securities, said, "NVIDIA's earnings surprise and significant upward revision of earnings guidance based on increased AI semiconductor demand have expanded expectations for improvement in the domestic semiconductor industry. In particular, the improved demand for graphics processing units (GPUs) for AI model development and cloud demand is positive for domestic memory semiconductor companies." He added, "The Chinese government's announcement banning the sale of Micron products domestically has raised expectations that demand for Korean semiconductors in China may increase in the short term. Following production cuts by memory semiconductor companies, the potential expansion of semiconductor demand is a factor that raises expectations for semiconductor earnings improvement in the second half of the year and will positively affect semiconductor stock prices."

Uncertain U.S. Interest Rate Path, Focus on Economic Indicators

With mixed outlooks on the interest rate decision at the June U.S. Federal Open Market Committee (FOMC) meeting, the market is expected to closely watch upcoming economic indicators.

Economic data released the previous day indicated that concerns about tightening could resurface. The preliminary U.S. first-quarter Gross Domestic Product (GDP) was 1.3% annualized, exceeding the flash estimate of 1.1% released last month. Personal consumption was 3.8%, and the price index was 4.2%, both surpassing the flash estimates of 3.7% and 4.0%, respectively. Weekly initial jobless claims recorded 229,000, below the expected 245,000. Jihyun Kim, a researcher at Kiwoom Securities, explained, "Along with employment, consumption and inflation were stronger than expected, while inventory adjustments are concluding, leading the 10-year U.S. Treasury yield to rise to 3.82%. Among the interest rate hike scenarios priced in the market, the likelihood of an additional hike in June and a pause in July has increased."

The April PCE price index is scheduled to be released on this day. The forecast for the April PCE price index is 4.3% year-on-year (previous month 4.2%), and the core PCE is 4.6% (previous month 4.6%), expected to show a slight increase or a slowdown in the rate of decline, similar to the April Consumer Price Index (CPI). Researcher Kim said, "If the data is released as expected, the outlook for a rate hike in June and a pause in July could be strengthened, but it would be appropriate to focus on the fact that the downward trend in inflation remains valid."

Particular attention should be paid to the core price index. Researcher Na explained, "Federal Reserve (Fed) officials have announced that they will decide on interest rates after confirming further slowing of inflation indicators, so it is necessary to confirm disinflation in the April PCE prices. Especially, attention should be paid to whether the April core PCE inflation falls below the previous month's 4.6%," he said.