[Good Morning Market] All Eyes on AI Stocks' Earnings... Will Foreign Buying Continue?

On December 11, the domestic stock market is expected to show a limited upside, keeping a close watch on the strong performance of the New York stock market overnight and the earnings of major artificial intelligence (AI) companies.

Previously, on December 10 (local time), the New York stock market closed higher across the board, buoyed by the U.S. Federal Reserve's announcement of an interest rate cut and liquidity supply. The Dow Jones Industrial Average, which is centered on blue-chip stocks, jumped by 497.46 points (1.05%) to close at 48,057.75. The S&P 500 Index, which focuses on large-cap stocks, rose by 46.17 points (0.67%) to 6,886.68, while the tech-heavy Nasdaq Index gained 77.669 points (0.33%) to finish at 23,654.155.

Reuters Yonhap News

With the major event of the December Federal Open Market Committee (FOMC) meeting now concluded, the market's attention is expected to shift toward the earnings of AI companies. Oracle, which announced its results after the market closed, dropped about 6% in after-hours trading, once again fueling AI bubble concerns. Meanwhile, major AI semiconductor companies such as Broadcom and Micron are scheduled to announce their earnings soon.

Han Ji-young, a researcher at Kiwoom Securities, commented, "Although the domestic stock market is expected to show strength today due to the less hawkish-than-expected outcome of the December FOMC, the index's upside will likely be limited as the market digests opinions surrounding the meeting and reacts to the sharp drop in Oracle's after-hours share price. However, thanks to strong demand forecasts for graphic processing units (GPUs) and tensor processing units (TPUs), the upcoming Broadcom earnings tomorrow and Micron's earnings next week could be received at least neutrally, if not positively."

Recently, the KOSPI has been fluctuating around the 4,100 level, and the forward price-to-earnings ratio (PER) valuation remains in the low 10s, which is in line with historical averages. However, experts assess that the market has more upside potential than downside risk. Another positive factor is that foreign investors, who recorded a record net sell-off of 14.4 trillion won in November this year, have shifted to a net purchase of 1.4 trillion won so far this month.

The researcher added, "Since today is the simultaneous expiration date for futures and options, changes in foreign investors' positions in both the spot and futures markets are likely to drive intraday volatility, especially in large-cap stocks such as semiconductors. Given that the valuation and earnings momentum of the domestic stock market are also pointing more toward the upside than the downside, it would be advisable not to respond too conservatively to today's volatile trading session."

Na Jeonghwan, a researcher at NH Investment & Securities, explained, "Since the FOMC, the dollar index (DXY), which reflects the value of the U.S. dollar against the currencies of six major countries, has fallen from the 99-point range to the 98-point range. This could create downward pressure on the won-dollar exchange rate, which may be favorable for the supply-demand dynamics of the Korean stock market. From a sector perspective, it is worth paying attention to the potential relative strength of IT, cyclical, and industrial stocks."