[Good Morning Stock Market] US Semiconductor Stocks Rally... KOSPI Expected to Start Higher

[Image source=Yonhap News]

On the 6th, the KOSPI is expected to start higher, supported by the strength of U.S. semiconductor stocks.

On the previous day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed down 274.3 points (0.71%) at 38,380.12. The large-cap S&P 500 index fell 15.8 points (0.32%) to 4,942.81, and the tech-heavy Nasdaq index dropped 31.28 points (0.2%) to 15,597.68.

The New York stock market had reached record highs on the prior trading day, June 2, with the Dow Jones Industrial Average and S&P 500 rising 0.35% and 1.07%, respectively, but turned bearish in just one day following comments from Jerome Powell, Chair of the U.S. Federal Reserve (Fed), and other Fed officials.

Chairman Powell appeared on CBS in the U.S. the day before and said, "We want to see more evidence that inflation is steadily declining toward 2%," adding, "Our confidence is increasing. We just want more confidence before taking the very important step of starting to cut interest rates."

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 0.8%, while the MSCI Emerging Markets Index ETF rose 0.2%. Eurex KOSPI 200 futures increased by 0.01%. Considering this, the KOSPI is expected to start slightly higher.

In particular, despite uncertainties stemming from the Fed, such as the U.S. 10-year Treasury yield entering the 4.15% range and a strong dollar, the strength of U.S. semiconductor stocks led by Nvidia, supported by Goldman Sachs' upward target price revisions, is expected to offset these factors. Within this environment, a rotation market is anticipated between semiconductor stocks and low price-to-book ratio (PBR) sectors, as well as among stocks within the low PBR sectors.

Han Ji-young, a researcher at Kiwoom Securities, analyzed, "As the foreign investors' 'Buy Korea' narrative is forming and the government’s shareholder return policies are gaining momentum, their net buying is expected to focus on low PBR stocks." She added, "The fact that automobile and banking stocks showed price resilience after midday yesterday can also be interpreted in the same context as the strength of foreign investor demand."

Researcher Han further explained, "Since foreign investors will continue to play a main role in supply and demand this year, a trading strategy benchmarking their net buying pattern of low PBR stocks could be effective. However, since the simple idea of buying low PBR stocks was exhausted during last week’s price surge, a selective approach within low PBR sectors considering earnings, share buybacks and cancellations, and dividend expansion potential is necessary."

Meanwhile, the one-month non-deliverable forward (NDF) won/dollar exchange rate in New York stood at 1,331.94 won. Reflecting this, the won/dollar exchange rate is expected to start about 1 won higher on the day.