[Weekly Market Outlook] Taking a Breather Ahead of June FOMC... "Watch for Profit-Taking Sell-Offs"

KOSPI Rose 0.7% Last Week This Week
Semiconductor Stocks Up, Debt Ceiling Deal Boosts Market

[Asia Economy Reporter Minji Lee] This week (May 30 to June 2), the domestic stock market ended on a sharp rise, driven by a semiconductor stock rally sparked by Nvidia and the resolution of the US debt ceiling negotiations. Next week, the stock market is expected to enter an event lull ahead of the June Federal Open Market Committee (FOMC) meeting, with political uncertainties related to the debt ceiling negotiations having been resolved. Although concerns over interest rate hikes have diminished, and thus large volatility is unlikely, profit-taking selling pressure should be monitored carefully given the recent rapid surge.

[Image source=Yonhap News]

According to the Korea Exchange on the 5th, the KOSPI rose 0.73%, from 2582.41 to 2601.36 this week. The sharp rise in semiconductor companies' stock prices, following Nvidia's consecutive surges after its Q1 earnings announcement last week, was a key factor in the index's increase. On June 2, the KOSPI surged 1.25% in a single day, touching the 2600 level for the first time in over a year, buoyed by the resolution of the US debt ceiling negotiation issue.

Among semiconductor stocks, Samsung Electronics rose 2.7%, and SK Hynix increased by 1.01%. Other gainers included Isu Petasys (8.33%), DB HiTek (2.93%), and Daeduck Electronics (9.89%). Kyungmin Lee, a researcher at Daishin Securities, explained, “The semiconductor sector showed clear strength, supported by expectations of passing the industry bottom, positive news from Nvidia, and inflows of foreign net buying.” He added, “In particular, foreigners have been net buyers for five consecutive months, purchasing stocks worth 12 trillion won, with capital inflows concentrated in the semiconductor sector.”

Market attention is expected to focus on the June FOMC meeting scheduled for the 13th and 14th. According to the Beige Book released on May 31, inflation and employment have slowed, easing concerns about interest rate hikes. However, disagreements among Federal Reserve (Fed) officials regarding rate hikes persist, as seen in the May FOMC minutes, and the employment data released on June 2 exceeded market expectations, showing resilience. Therefore, upcoming economic indicators need to be closely monitored. The May Consumer Price Index (CPI) is scheduled to be announced on June 13.

NH Investment & Securities projects the KOSPI range for next week to be between 2500 and 2620. Experts advise caution regarding short-term profit-taking selling pressure, given the KOSPI's sharp rise of over 4% last month. Especially since concerns about June rate hikes have already been priced into the index, further significant gains are unlikely.

Researcher Younghwan Kim of NH Investment & Securities said, “Some worry that with the debt ceiling raised, the Treasury will issue a large volume of government bonds, potentially tightening liquidity for stocks and other assets.” He added, “As US semiconductor companies are experiencing profit-taking after sharp stock price increases, the desire for profit-taking may also grow in the domestic stock market.” However, Kim noted, “The semiconductor sector remains a key driver for KOSPI gains in the second half of the year, so responding with buying during corrections is positive.”

Another sector worth expanding interest in is healthcare. With the American Society of Clinical Oncology (ASCO) Annual Meeting taking place until June 6, investor sentiment toward biotech companies could significantly improve depending on trends in cancer drug development and clinical trial results.