[Good Morning Market] "S&P 500 Hits New High... KOSPI Expected to Start Strong"

Index Rises on Special Expectations for Artificial Intelligence (AI)

[Image source=Yonhap News]

The Korean stock market is expected to start higher on the 22nd. Over the past weekend, major U.S. indices including the S&P 500 reached new all-time highs, driven by enthusiasm for artificial intelligence (AI). The Korean market is also expected to be led by AI-related stocks such as semiconductors.

On the 19th (local time) at the New York Stock Exchange (NYSE), the S&P 500 closed at 4,839.81, up 58.87 points (1.23%) from the previous session, setting a new all-time high. The intraday high also reached a record 4,842.07. The Dow Jones Industrial Average rose 395.19 points (1.05%) to 37,863.80, and the tech-heavy Nasdaq Composite closed up 255.32 points (1.70%) at 15,310.97.

The main reason for the New York market's rally was the AI boom. TSMC exceeded consensus expectations in last year's earnings. CEO C.C. Wei stated during the earnings announcement, "The surge in AI-related demand last year supports our thesis that there is structural demand for low-power computing in an intelligent and connected world," adding, "Almost every AI innovation company is collaborating with TSMC."

Meta's investment announcement also helped drive the indices. Meta announced plans to invest $15 billion to $18 billion over the medium to long term to expand its AI capabilities. Tech stocks showed strength, with both the Philadelphia Semiconductor Index and the Nasdaq 100 Index hitting historic highs.

The consumer sentiment index released that day also had a positive impact. The University of Michigan Consumer Sentiment Index for January recorded 78.8, the highest since July 2021. The one-year expected inflation rate fell from 3.1% last month to 2.9%, marking the lowest level since December 2020.

Considering these factors, the KOSPI is also expected to show strength. Seokhwan Kim, a researcher at Mirae Asset Securities, said, "The KOSPI is expected to start about 1% higher," and evaluated, "the 12-month forward price-to-earnings ratio (PER) of the KOSPI is 9.9 times, below the recent 10-year average of 10.3 times, entering a valuation and price merit zone due to the excessive decline at the beginning of the year." However, he added, "Since differentiation among sectors is intensifying, a selective approach is necessary."