[Good Morning Stock Market] Will the Domestic Market Bottom Out? "Focus on Semiconductor Regulations and Yen Carry Trade Liquidation"

This week, attention is focused on whether the domestic stock market will rebound after last week's sell-off. Analysts in the securities industry suggest closely monitoring U.S. semiconductor export restrictions on China and pressure from yen carry trade liquidations, while advising against further reduction in holdings.

Reuters Yonhap News

On the 29th of last month (local time), the Dow Jones Industrial Average on the New York Stock Exchange (NYSE) closed at 44,910.65, up 188.59 points (0.42%) from the previous trading day. The S&P 500, which is centered on large-cap stocks, rose 33.64 points (0.56%) to 6,032.38, and the tech-heavy Nasdaq closed at 19,218.17, up 157.69 points (0.83%).

The post-U.S. presidential election rally continued with expectations of a Santa Claus rally, leading the Dow and S&P 500 to break their intraday all-time highs for the second trading day in a row. For the week, the Dow rose 1.4%, while the S&P 500 and Nasdaq each gained 1.1%. The Russell 2000, composed of small- and mid-cap stocks, also increased by 1.2%.

By sector, among the 11 sectors comprising the S&P 500, nine rose except for real estate (-0.52%) and utilities (-0.05%). Consumer discretionary (1.11%), consumer staples (0.41%), energy (0.34%), financials (0.02%), healthcare (0.26%), industrials (0.43%), materials (0.49%), technology (1.00%), and communication services (0.34%) all advanced.

Looking at individual stocks, among the large tech group 'Magnificent 7 (M7)', Alphabet (-0.17%) showed a slight decline, while Nvidia (2.15%), Microsoft (0.11%), Apple (1.02%), Tesla (3.69%), Amazon (1.05%), and Meta (0.90%) all rose.

Additionally, with the Biden administration expected to announce additional semiconductor regulations on China this week, reports that the regulatory measures may be less severe than initially anticipated boosted semiconductor equipment companies' stock prices. Applied Materials rose 1.98%, Lam Research 3.23%, and ASML 2.41%.

The domestic market still appears to need caution regarding the 'Trump Trade' (investing in assets that could benefit from Trump policies). Ji-won Kim, a researcher at KB Securities, said, "Uncertainty over Trump policies is suppressing investor sentiment, likely prolonging sideways movement and sector differentiation. Regarding U.S. semiconductor export restrictions on China, since the market had already priced in a significant drop last week, further declines are expected to be limited."

Concerns have been raised about yen carry trade liquidation selling due to yen strength. Ji-young Han, a researcher at Kiwoom Securities, noted, "One of the apparent reasons for last week's sharp drop in the domestic market was anxiety over yen carry trade liquidation. However, the market has already developed resilience to yen carry trade liquidations. Unless the yen-dollar rate plunges to the low 140 yen range this week, the negative impact and persistence on the stock market will be limited."

Regarding last month's Korean exports falling short of market expectations, one researcher said, "Concerns about export sluggishness and domestic growth slowdown risks seem to have been factored in during the domestic market's historically poor performance recently. There is a possibility of finding a turning point through the November ISM Manufacturing Purchasing Managers' Index (PMI) results in the U.S." He added, "While a dramatic rebound in the domestic market may not be easy, it would be appropriate to avoid further reduction in holdings."