[Good Morning Market] Nvidia Earnings Concerns... KOSPI Expected to Open Lower

On November 19, the KOSPI is expected to open lower due to the weakness in U.S. artificial intelligence (AI)-related stocks and caution ahead of Nvidia's earnings announcement.

In the previous session, the Dow Jones Industrial Average closed at 46,091.74, down 498.50 points (-1.07%) from the previous close. The S&P 500 index ended at 6,617.32, down 55.09 points (-0.83%), while the tech-heavy Nasdaq Composite finished at 22,432.85, down 275.23 points (-1.21%).

Major AI blue-chip stocks such as Nvidia, Microsoft (MS), and Micron have recently come under correction pressure, creating a negative ripple effect across the market. The weakness of these leading stocks has triggered further selling, leading to a chain reaction of additional sell-offs.

In an environment where investor sentiment is extremely subdued, most developments tend to be interpreted negatively. Even the news of a partnership agreement between Microsoft, Nvidia, and Anthropic announced the previous day was viewed pessimistically by the market, likened to the "Ponzi-style investing" that was prevalent just before the dot-com bubble burst.

The key to a market turnaround ultimately lies in Nvidia's earnings announcement scheduled for tomorrow. For this earnings report, there are more factors to monitor than before, including whether results exceed consensus expectations, whether there is improvement in gross profit margin (GPM), whether the impact of the export ban on H20 products to China can be offset, and the status of new graphics processing unit (GPU) supply. In particular, as global stock markets are reacting to Nvidia's earnings with unprecedented sensitivity, there is a high possibility of significant volatility during the market's interpretation and reassessment process following the announcement.

The domestic stock market was significantly affected by the sharp decline in U.S. AI and semiconductor stocks and the simultaneous weakness in Asian markets the previous day. Both foreign and institutional investors recorded net selling, resulting in declines for most of the KOSPI's large-cap stocks, with the KOSPI closing down 3.3% and the KOSDAQ down 2.7%. The market is also expected to start weak in early trading today, but bargain hunting following the previous day's steep drop may flow into semiconductor, defense, shipbuilding, and financial stocks, potentially leading to a market where losses are limited and performance varies by sector.

The deterioration in investor sentiment is also evident in trading value. The KOSPI's average daily trading value fell clearly from 21.9 trillion won in the first week of November to 16.6 trillion won in the second week, and to 13.9 trillion won in the third week (based on two trading days). In addition, utilities were the only sector to record positive returns for three consecutive weeks since November, indicating that the market is responding by focusing on defensive sectors.

Han Jiyoung, a researcher at Kiwoom Securities, said, "The KOSPI has continued to show high volatility, with daily swings of over 100 points in six out of twelve trading days this month, increasing investor fatigue. However, as repeated negative factors have partially eased concerns about short-term overheating, there is also a possibility of a market rebound after major events such as Nvidia's earnings and the U.S. September employment data."

She added, "For the remainder of this week, rather than being swayed by excessive fear, it is advisable to either observe the market or respond with gradual buying of leading stocks that have experienced excessive declines."