[Good Morning Market] AI Momentum Strengthens... KOSPI Expected to Open Higher

Driven by the strong performance of artificial intelligence (AI)-related stocks in the U.S. stock market, the KOSPI is also expected to open higher on November 4.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 47,336.68, down 226.19 points (0.48%) from the previous session. The S&P 500 Index rose 11.77 points (0.17%) to close at 6,851.97, while the Nasdaq Composite Index ended the session up 109.77 points (0.46%) at 23,834.72.

Recently, both the Korean and U.S. stock markets have been experiencing a simultaneous upward trend. However, despite the rising indices, there has been an "imbalanced market" where the number of declining stocks outnumbers those advancing. This suggests that market funds are being concentrated in sectors with growth narratives and solid earnings, such as AI and semiconductors.

In the U.S., semiconductor-related stocks such as Micron (up 4.9%) and SanDisk (up 3.9%) surged on expectations of higher DDR5 and SSD prices, supported by positive news from major big tech companies like Nvidia and Amazon. Similarly, in the domestic market, expectations for an AI alliance led by Nvidia drove sharp gains in semiconductor and defense stocks such as SK Hynix (up 10.9%) and Hanwha Aerospace (up 6.4%), with the KOSPI closing up 2.8% and the KOSDAQ up 1.6% the previous day.

The AI momentum from the U.S. is expected to strengthen further following Palantir's earnings surprise announced after the market closed. As a result, the domestic stock market is also anticipated to start higher, with the possibility of sector rotation among key industries such as semiconductors, shipbuilding, defense, and automobiles during the session.

Notably, the KOSPI surged 19.9% in October alone, marking the sixth highest monthly gain since 1995. While the market is wary of a possible short-term correction, the prevailing view is that there is additional upside potential in the mid-term. Some analysts even compare the current trend to the explosive rallies seen from the period immediately after the 1998 IMF crisis to the dot-com bubble in 2001.

However, the recent shift of foreign investors to net selling poses a concern. From October 27 to the previous day, foreign investors were net sellers of 687 billion won, while individual investors were net buyers of 1.8 trillion won during the same period, leading the rally. In this process, individuals increased their leverage bets, pushing the KOSPI margin loan balance to an all-time high of 15.6 trillion won, raising concerns about excessive speculative trading.

Han Jiyeong, a researcher at Kiwoom Securities, commented, "While the KOSPI surged nearly 20% last month, the margin loan balance increased by only 11%, indicating that market overheating is not a widespread phenomenon." He added, "However, some sectors such as semiconductors, securities, and media·education have accumulated short-term credit risk, so it is necessary to be mindful of the potential for increased short-term volatility in supply and demand." He further stated, "Although there is short-term price pressure, as long as the narrative and earnings momentum centered on AI and semiconductors remain intact, any price correction should be viewed as a buying opportunity in installments."