[Weekly Market Outlook] High Interest Rate Concerns Persist... Samsung Electronics Earnings & US September Inflation in Focus

This week (10th to 13th), the domestic stock market is expected to continue facing uncertainty due to the recent sharp rise in interest rates. Amid this, as the earnings announcement season for major companies including Samsung Electronics approaches, investor attention is likely to focus on these developments.

According to the Korea Exchange, on the 6th, the KOSPI index closed at 2408.73, down 56.34 points (2.29%) from the previous week’s 2465.07. The market showed a sluggish trend, falling for two consecutive days immediately after the Chuseok holiday. During the same period, the KOSDAQ index also dropped 24.63 points from 841.02 to 816.39. This simultaneous decline in indices appears to have absorbed the impact of the sharp rise in the dollar index and the US 10-year Treasury yield during the holiday period. Additionally, the passage of the no-confidence motion against US House Speaker Kevin McCarthy has increased uncertainty over the US federal budget approval for next year, adding to external concerns.

Market uncertainty is expected to continue this week as well. NH Investment & Securities has projected the weekly KOSPI fluctuation range to be between 2370 and 2550 points. Factors supporting an increase include the slowdown in the US core consumer price inflation and the scheduled preliminary earnings announcement of Samsung Electronics for the third quarter. On the other hand, concerns over further tightening by the US Federal Reserve (Fed) are seen as a downward pressure.

Samsung Electronics Seocho Building. Photo by Jinhyung Kang aymsdream@

Na Jeong-hwan, a researcher at NH Investment & Securities, said, "As the third-quarter earnings season approaches, the stock market’s focus will gradually shift from concerns about high interest rates to whether fundamentals improve." He added, "The recovery in domestic September exports and the ISM manufacturing index announced during the Chuseok holiday are factors that raise expectations for third-quarter corporate earnings." He continued, "In particular, semiconductor export value reached $9.9 billion, the highest since October 2022, expanding expectations for semiconductor earnings recovery." He further stated, "If the semiconductor sector’s bottoming is confirmed through a rebound in semiconductor prices and increased memory demand, the attractiveness of semiconductor stocks will increase." Samsung Electronics is scheduled to announce its preliminary third-quarter earnings on the 11th.

On the other hand, there are also forecasts that volatility will ease as the sharp rise in interest rates calms down. Lee Kyung-min, a researcher at Daishin Securities, said, "Considering that variables causing bond yield increases (such as expanded issuance volume, rising oil prices, and prolonged high interest rates) have been largely priced in, the sharp rise is expected to ease with some time lag." He added, "Speculative net short positions on US 10-year Treasury futures have reached a historic high of over 800,000 contracts, and as excessive selling pressure subsides, bond yields are expected to stabilize downward." He also noted, "Since this time the sharp rise and overshooting were caused by short-term panic selling, bond yields may respond quickly to changes in investor sentiment and supply-demand conditions."

Particularly, the US Consumer Price Index (CPI) for September, to be announced on the 12th, is drawing attention. The market consensus expects a 3.6% year-on-year increase, slightly down from 3.7% in the previous month. Lee said, "Confirming that the downward stabilization trend in inflation remains valid, along with the slowdown in employment indicators, concerns about prolonged high interest rates will ease, leading to a calming of the sharp rise in bond yields."