[Good Morning Market] Heated Korean Stock Market: Time for a Pause?

On June 26, the domestic stock market is expected to experience a period of consolidation, reflecting positive developments in U.S. semiconductor stocks.

Previously, the New York stock market, which had rallied for two consecutive days due to easing tensions in the Middle East, ended mixed in a narrow range on June 25 (local time). The Dow Jones Industrial Average, focused on blue-chip stocks, fell by 106.59 points (0.25%) to close at 42,982.43. The S&P 500 Index, which tracks large-cap stocks, slipped by 0.02 points (less than 0.1%) to 6,092.16. The tech-heavy Nasdaq Index rose by 61.02 points (0.31%) to finish at 19,973.55.

Reuters Yonhap News

Kim Ji-won, a researcher at KB Securities, commented, "The market entered a consolidation phase due to concerns about major indexes approaching their previous highs," and added, "The Nasdaq ended slightly higher, supported by strength in semiconductor stocks such as Nvidia." Nvidia, the leading artificial intelligence (AI) stock, saw its shares rise by 4.33%. CEO Jensen Huang highlighted robotics technology as the next major growth opportunity after AI, helping the company reclaim its position as the world's most valuable company by market capitalization.

News of Nvidia's record high is also expected to provide a boost to domestic semiconductor stocks. Lee Sung-hoon, a researcher at Kiwoom Securities, said, "Today, the domestic market is expected to rebound, particularly among semiconductor stocks such as HBM, reflecting Micron's earnings, which exceeded market expectations, as well as Nvidia's new record high." However, he added, "Given the recent sharp rally, the domestic market has technically entered an overheated phase, so we expect a period of consolidation at the index level."

With the KOSPI recently surpassing 3,100, there are growing concerns about a short-term overheating of the market. According to the Korea Financial Investment Association, on June 23, both investor deposits and KOSPI margin loan balances exceeded 65 trillion won and 12 trillion won, respectively, reaching their highest levels since 2022. Han Ji-young, a researcher at Kiwoom Securities, explained, "Technical indicators are showing signs of overheating," and added, "The Relative Strength Index (RSI), a supplementary indicator for assessing price trend strength, is currently at 86%, far above the overbought threshold of 70%."

Another point of interest is the improvement in supply and demand for stocks that have been excluded from the recent rally. Lee also noted, "A notable recent trend is that sectors such as automobiles and secondary batteries, which had been left out of the rally, are now showing signs of rebounding thanks to ample market liquidity," and added, "It will be important to watch whether the rotation from former leading stocks to previously neglected stocks continues today."