[Market View] Additional decline due to weakness in US semiconductors? Reaction buy?... KOSPI Hyangbae

Attention is being paid to whether KOSPI, which plummeted the previous day, will attempt to rebound on the 13th due to a backlash buying trend due to the perception that the drop was exaggerated.

According to the Korea Exchange, the previous day, KOSPI closed at 6,384.24, down 241.69 points (3.65%).

It has been two months since August 11 (6,345.53) that the index was pushed back to the 6,300 range based on the closing price. The decline rate is the largest since the 2nd of last month (-3.99%).

The index showed weakness for 4 consecutive trading days from the 6th to this day, falling a total of 619.50 points (8.85%) during this period. The daily decline rate during this period is 0.89%, 1.98%, 2.62%, and 3.65%, and the decline is getting stronger.

Major semiconductor stocks such as Samsung Electronics [005930] (-4.39%) and SK Hynix [000660] (-4.52%) fell sharply the previous day, and secondary battery stocks such as LG Energy Solution [373220] (-0.75%) and Samsung SDI [006400] (-1.41%), which had recently performed well, also did not show strength.

As of regular trading, foreigners and institutions net sold KRW 2.025 trillion and KRW 110.6 billion, respectively, dragging down the index. Individuals made net purchases of 1.4674 trillion won, but it was not enough to defend the index.

Including the aftermarket, foreigners and institutions had a selling advantage of KRW 2.011 trillion and KRW 133.8 billion, respectively, while individuals had a buying advantage of KRW 1.4857 trillion.

The KOSDAQ index also fell 43.08 points (4.83%) to 849.19, showing the largest drop since July 29 (-6.12%).

Last night, the New York stock market showed mixed results with trading being quiet due to the public holiday Columbus Day.

The Dow Jones Industrial Average rose 0.38%, but the Standard & Poor's (S&P) 500 Index fell 0.06% and the Nasdaq Composite Index fell 0.44%.

In particular, the sluggish performance of semiconductor stocks such as Micron (-3.88%), Intel (-3.2%), Arm (-4.15%), NVIDIA (-1.29%), TSMC (-1.29%), and Broadcom (-1.88%) is noticeable.

SK Hynix's American Depository Receipt (ADR) was also weak by 4.02%, and the Philadelphia Semiconductor Index fell 2.67%.

It appears that the bad news was that Chinese semiconductor company Changshin Memory (CXMT) announced that it would mass produce next-generation 4F Square structure DRAM within the year, which has improved performance by drastically reducing cell size.

The fact that Broadcom and Intel executives warned of the burden of capital raising in expanding their artificial intelligence (AI) business also worsened investment sentiment.

According to CNBC, an American economic media outlet, Broadcom CEO Hock Thanh said at an event held in Singapore on the 12th (local time) that "the biggest constraint" in AI expansion is likely to be capital.

“The biggest challenge (in expanding business) is capital and the cost of capital, and in the long run, people want to see a return on investment (ROI),” said Intel CEO Lipbu Thanh.

Regarding this, Seo Sang-young, managing director of Mirae Asset Securities, said, "It is presumed that the sale was made to realize profits under the pretext of (companies') ability to raise funds and (China's) expansion of its own semiconductor development, rather than a slowdown in semiconductor demand itself."

The fact that international oil prices rose for three consecutive trading days in the aftermath of the attack on Riad International Airport in Saudi Arabia also put a burden on the market.

Brent crude oil for December delivery rose 1.84% from the previous day to close at $106.65 per barrel, and U.S. West Texas Intermediate (WTI) crude oil for November delivery rose 2.06% to close at $93.74.

Indicators related to investment sentiment in the Korean stock market fell all at once.

The Morgan Stanley Capital International (MSCI) Korea Stock Market ETF fell 4.02% and the MSCI Emerging Markets Index ETF fell 0.97%.

The domestic stock market appears to be having a tough time today as well. However, it is worth noting that negative news from China's CXMT and noise related to AI investments by global companies have already been reflected.

Managing Director Seo said, "We expect the early market weakness to continue due to the sluggishness of the semiconductor industry and the burden of supply and demand from foreigners. However, much of the related negative news was reflected in advance the previous day, and given that China's Changshin Memory's technological progress does not mean an immediate increase in supply or a decline in memory prices, there is a high possibility of a narrowing of the decline and an influx of counter-buying."

However, there is also an analysis that some time will be needed for a clear recovery.

Ji-young Han, a researcher at Kiwoom Securities, explained, "(KOSPI) is likely to have created conditions for a short-term rebound from a technical and valuation perspective," but added, "We must open the possibility (scenario) of an index rebound due to the perception of excessive decline → Possibility of some alleviation of macro and profit uncertainties through the performance of the U.S. Consumer Price Index (CPI), ASML, and TSMC in September → Stabilization of supply and demand for foreigners → Resumption of index recovery phase (scenario)."

ASML will announce its performance on the 14th and TSMC on the 15th, Korean time. The US September CPI will be announced on the night of the 14th.