[Good Morning Market] KOSPI Expected to Open Lower on U.S. Tech Stock Correction

Nvidia, Samsung, and Hyundai Motor Meeting Seen as Positive
Expectations Remain for Intraday Rebound

On October 31, the Korean stock market is expected to open lower, reflecting the weakness in technology stocks and the decline in semiconductor stocks seen in the previous day's New York market.

On October 30 (local time), the Dow Jones Industrial Average closed at 47,522.12, down 109.88 points (0.23%) from the previous session. The S&P 500 Index fell by 68.25 points (0.99%) to 6,822.34, and the tech-heavy Nasdaq Index plunged by 377.33 points (1.58%) to 23,581.14. The Russell 2000 Index, which focuses on small- and mid-cap stocks, also dropped by 0.76%.

Investors reacted sensitively to major technology companies' plans to expand capital expenditures on artificial intelligence (AI). Despite reporting strong earnings the previous day, Meta plunged by 11.33% after announcing a large-scale investment plan for future AI infrastructure. Microsoft also fell by 2.9% due to concerns over profitability stemming from significant capital expenditures. Nvidia, which had surpassed a market capitalization of 5 trillion dollars the day before, retreated by 2%, and Amazon also weakened by 3.23%. In contrast, Alphabet rose by 2.45% on the back of strong earnings, showing resilience.

The direction of the U.S. Federal Reserve's monetary policy also weighed on the market. The previous day, the Federal Open Market Committee (FOMC) decided to lower the benchmark interest rate by 0.25 percentage points to an annual rate of 3.75-4.0%. However, Jerome Powell, Chair of the Federal Reserve, drew a line by stating, "It should not be taken for granted that there will be a rate cut in December." In fact, internal disagreements surfaced during the meeting, with one member advocating for a 0.5 percentage point cut and another calling for a rate freeze.

Yonhap News Agency

The outcome of the U.S.-China summit provided only temporary relief and was insufficient to trigger a market rebound. U.S. President Donald Trump and Chinese President Xi Jinping held talks at Busan Gimhae Air Base and reached a tentative agreement to ease trade tensions between the two countries. The United States agreed to lower tariffs related to fentanyl on all Chinese imports from 20% to 10%, while China decided to suspend rare earth export restrictions for one year and resume imports of U.S. soybeans. However, the market regarded this as a short-term "small deal" and remained cautious.

The MSCI Korea Exchange Traded Fund (ETF), which is closely linked to the Korean stock market, fell by 1.69%, and the Philadelphia Semiconductor Index dropped by 1.53%.

The domestic stock market is expected to follow this trend and open lower today. In addition to the recent surge in the index leading to concerns about short-term overheating, the adjustment in the U.S. market the previous day is also expected to weigh on the market. However, ample idle funds are likely to support the lower end of the market. Lee Sunghoon, a researcher at Kiwoom Securities, said, "Given the abundant liquidity, with deposits surpassing 85 trillion won, there remains an incentive for bargain hunting, so it is expected that losses will be recovered as the session progresses."

Meanwhile, the previous day's meeting between Jensen Huang, CEO of Nvidia, and Lee Jae-yong, Chairman of Samsung Electronics, as well as Chung Euisun, Chairman of Hyundai Motor, is seen as a factor that could have a positive impact on the Korean stock market. Researcher Lee noted, "The momentum of technological cooperation between Korea and the United States is likely to improve investor sentiment," adding, "It is worth paying attention to whether cooperation with major domestic companies in high-bandwidth memory (HBM), autonomous driving, and robotics will expand."