[Good Morning Market] US-China Tensions Flare Up During Holiday... "Korean Market Expected to Open Down Over 3%"

Profit-Taking Pressure Mounts in Korea
as Semiconductor Stocks Weaken

Amid renewed tensions between the United States and China, the Korean stock market is expected to open lower on October 13, following a sharp decline in the New York stock market. In particular, the significant drop in U.S. semiconductor stocks is anticipated to weigh on the domestic market.

On October 10 (local time), the Dow Jones Industrial Average closed at 45,479.60, down 878.82 points (1.90%) from the previous trading day. The S&P 500 Index dropped by 182.60 points (2.71%) to 6,552.51, and the Nasdaq Index fell by 820.20 points (3.56%) to 22,204.43. The Russell 2000 Index, which focuses on small and mid-cap stocks, also declined by 3.01%. The declines in the S&P 500 and Nasdaq were the largest in six months since April 10, when the Donald Trump administration announced its sweeping tariff policy.

President Trump's remarks about the possibility of imposing high tariffs on Chinese products dragged down the indices. On this day, President Trump described China's move to control rare earth exports as a "hostile act" on the social networking service Truth Social, and stated, "I was scheduled to meet with Xi Jinping (President of China) at the APEC (Asia-Pacific Economic Cooperation) summit in Korea in two weeks, but now it seems there is no reason to do so." He added, "One of the policies we are currently considering is a large-scale tariff increase on Chinese products entering the United States," and further stated, "Likewise, many other countermeasures are also being seriously considered."

The Nasdaq Index, which had been on a record-breaking streak, turned sharply lower immediately after these comments. As a result, the Chicago Board Options Exchange (CBOE) Volatility Index (VIX) surged to 22.44, marking its highest level in four months since June 19.

Major technology and semiconductor stocks all weakened. Nvidia (-4.95%), Tesla (-5.06%), Amazon (-4.99%), Apple (-3.44%), and Meta (-3.83%) all saw significant declines, while semiconductor stocks such as AMD (-7.80%) and Broadcom (-5.91%) were also hit hard. As China has played a key role in the global supply chain and as a major source of demand, concerns over tariff hikes immediately dampened investor sentiment.

The ongoing temporary U.S. federal government shutdown, now in its tenth day, also acted as a negative factor. Russell Vought, Director of the White House Office of Management and Budget, indicated via social media that "the layoff process has begun," signaling the start of federal employee layoffs and amplifying market anxiety.

As a result, the domestic stock market is likely to open with a decline of more than 3% on October 13. In particular, profit-taking is expected to emerge among semiconductor stocks, which have recently led the market's gains. NH Investment & Securities explained, "With the KOSPI surpassing 3,600, the 12-month forward price-to-earnings ratio has exceeded 11.8 times, and valuation concerns could also serve as a trigger for profit-taking."

However, considering that disputes during the second Trump administration have repeatedly followed a pattern of confrontation followed by partial resolution, there is a high possibility that the current phase of heightened tension will ease and shift back to the negotiating table. NH Investment & Securities advised, "Although a short-term correction in domestic stock prices is inevitable, the fundamentals of the semiconductor sector remain solid, so it is advisable to approach the market from a buying perspective."