[Good Morning Market] Broadcom Earnings Boost... Domestic Market Expected to Open Higher Led by Semiconductors

SK Hynix Designated as Investment Warning Stock, Posing a Source of Concern

The domestic stock market is expected to open higher, led by semiconductor stocks, buoyed by the positive impact of the U.S. stock market, which pared losses during the session despite negative news from Oracle, and by Broadcom's earnings surprise. However, the designation of SK Hynix as an investment warning stock is a source of concern.

Han Ji-young, a researcher at Kiwoom Securities, explained, "With SK Hynix being designated as an investment warning stock, there is now noise in the supply and demand for leading stocks, which is a unique challenge for the domestic market. When a stock is designated as an investment warning, restrictions such as a 100% margin requirement, prohibition of margin trading, and a ban on trading via the alternative exchange (NXT) may temporarily distort the share price."

On the 11th, employees are monitoring the stock market and exchange rates at the Hana Bank headquarters in Jung-gu, Seoul. Photo by Yonhap News

Han added, "While an investment warning can be seen as a signal of short-term overheating, it should not be interpreted as a sign that the stock price has peaked. This is because semiconductor stocks, unlike theme stocks that have made up the majority of investment warning stocks, are market leaders that have driven the overall level-up of the KOSPI."

The Market Surveillance Committee of the Korea Exchange designated SK Hynix as an investment warning stock on the 11th. If, after 10 trading days from the designation, the stock does not hit a new high and its rapid short-term rise is curbed, there is a possibility that it could be downgraded to an investment caution stock in the following 2 to 3 trading days.

Han also noted, "Until the investment warning designation is lifted, restrictions such as the prohibition of margin trading will continue to create supply and demand noise. However, it is important to reflect in your strategy the assumption that the impact on the overall direction of the domestic stock market, including semiconductors, will be limited."

Meanwhile, overnight in New York, the three major indices ended mixed due to the influence of the 'AI bubble theory' triggered by Oracle.

On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at an all-time high of 48,704.01, up 646.26 points (1.34%) from the previous session. The S&P 500 rose 14.32 points (0.21%) to 6,901.00, while the tech-heavy Nasdaq Composite fell 60.30 points (0.26%) to 22,593.86.

After the market closed the previous day, Oracle announced that its capital expenditures for fiscal year 2026 would be $50 billion, an increase of $15 billion from its previous forecast. As concerns over excessive investment mounted, the premium on Oracle's credit default swaps (CDS), which indicate the risk of default, soared to its highest level since 2009.

Oracle shares plummeted 16.49% during the session, and the Nasdaq index dropped as much as 1.46%. The Philadelphia Semiconductor Index, composed of AI and semiconductor-related stocks, also plunged by as much as 3.27% at one point. In response, the market shifted its focus from technology stocks to blue chips and cyclical stocks, with investors mainly buying shares of companies included in the Dow Jones such as Walmart, UnitedHealth Group, Boeing, Honeywell, Goldman Sachs, and JPMorgan Chase. The previous day's assessment that the Federal Reserve was 'less hawkish' than expected, as it cut the benchmark interest rate by 0.25 percentage points, also appeared to spur buying.

However, after the market closed, Broadcom announced earnings that exceeded market expectations, leading U.S. semiconductor stocks to rise in after-hours trading. This is expected to have a positive impact on the domestic stock market. In its earnings announcement, Broadcom reported sales of $18.02 billion for the previous quarter, surpassing the market forecast of $17.49 billion.