[Good Morning Stock Market] "KOSPI Expected to Start Lower Due to Weakness in Domestic Semiconductor Stocks"

Impact of Weakness in US Growth Stocks Including Nvidia

On the 3rd, the KOSPI is expected to start lower, mainly due to the weakness in domestic semiconductor stocks influenced by the simultaneous decline in U.S. growth stocks. However, since the U.S. stock market narrowed its intraday losses the previous day and the probability of a Federal Reserve (Fed) rate cut in June is strongly anticipated, the additional downward pressure on the domestic stock market is expected to be somewhat limited.

[Image source=Yonhap News]

The three major indices of the U.S. New York stock market closed lower on the 2nd (local time). On that day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 39,170.24, down 396.61 points (1%) from the previous trading day. The large-cap-focused S&P 500 index ended trading at 5,205.81, down 37.96 points (0.72%). The tech-heavy Nasdaq index closed at 16,240.45, down 156.38 points (0.95%).

The reason investor sentiment froze was that the U.S. manufacturing sector in March was much stronger than the market expected. According to the U.S. Institute for Supply Management (ISM) the previous day, the March Manufacturing Purchasing Managers' Index (PMI) recorded 50.3, surpassing both the previous month (47.8) and expert forecasts (48.5). Generally, a PMI above 50 indicates economic expansion, while below 50 indicates contraction.

Seojeong Hoon, a researcher at Samsung Securities, explained, "The New York stock market continued its decline overnight due to the sustained rise in market interest rates. Following the surprise in the manufacturing PMI the previous day, the February job openings and factory orders data released on the same day also exceeded expectations, putting upward pressure on U.S. Treasury yields."

Han Ji-young, a researcher at Kiwoom Securities, analyzed, "Currently, the U.S. stock market is creating an atmosphere to find justification for liquidating positions due to the burden of record highs, with the Fed's monetary policy at the center. As a result, financial market price indicators such as the dollar and interest rates are frequently experiencing rapid price changes, increasing stock market volatility."

The domestic stock market closed mixed the previous day as the rise in U.S. interest rates prompted large-scale selling mainly in growth stocks like biotech, but semiconductor stocks such as Samsung Electronics showed strength.

On this day, the KOSPI is expected to start lower due to the weak U.S. growth stocks. Researcher Han Ji-young said, "Due to macroeconomic instability, the simultaneous weakness of U.S. growth stocks such as Nvidia (-1.0%), Micron (-1.5%), and UnitedHealth (-6.4%) is expected to lead to a decline centered on domestic semiconductor stocks. Considering that the U.S. stock market narrowed its intraday losses the previous day and the probability of a Fed rate cut in June has again become dominant, the additional downward pressure across the domestic stock market is expected to be limited."

Han added, "From an industry perspective, due to the sharp drop in Tesla's stock price, investor sentiment related to the secondary battery value chain, including cell and materials sectors, could be negatively affected in the domestic stock market, so it is necessary to prepare for price and supply-demand volatility in these sectors during the trading day."

Kim Ji-won, a researcher at KB Securities, said, "Despite favorable U.S. economic indicators, expectations for a rate cut have retreated, causing a sharp rise in Treasury yields and a weak U.S. stock market. With rising interest rates, a strong dollar, and a decline in Bitcoin, gold prices have reached record highs, deepening differentiation in asset flows. Given the burden from supply-demand concentration, weakened electric vehicle investor sentiment related to Tesla, and increased monetary policy uncertainty, a cautious approach is necessary."