The KOSPI is expected to experience increased volatility as it absorbs the possibility of a U.S. interest rate hike in September. Following hawkish comments from Federal Reserve Chair Kevin Warsh, U.S. Treasury yields rose, leading to a sharp decline in semiconductor stocks, which is likely to exert downward pressure on domestic shares, particularly Samsung Electronics and SK Hynix.
Last weekend, U.S. stock markets closed lower across the board. On August 28, the Dow Jones Industrial Average finished down 0.02% at 53,559.99. The S&P 500 index fell by 0.25%, while the Nasdaq dropped 0.52%. The Philadelphia Semiconductor Index plummeted by 3.47%.
During the Jackson Hole meeting, Warsh noted insufficient progress in curbing inflation, suggesting that the Fed may take action if inflation does not decline to its target rate of 2%.
As a result, expectations for a September rate hike have increased. According to the Chicago Mercantile Exchange (CME), the probability of a 0.25 percentage point increase in the federal funds rate at the upcoming Federal Open Market Committee (FOMC) meeting has risen to 57.5%, up from 35.4% the previous day.
In response to the rising interest rate concerns, profit-taking has emerged, particularly in AI and semiconductor stocks. Nvidia saw a decline of 4.57%, while Marvell Technology dropped 10.28%, AMD fell 2.33%, and Intel decreased by 2.85%. Additionally, news of a surge in first-half sales from China's Changxin Memory Technologies (CXMT) has heightened concerns about increased competition in the memory sector.
Domestic semiconductor stocks are also showing weakness ahead of the market opening. As of 8:04 a.m. on August 31, Samsung Electronics was trading at 252,000 won, down 1.95% from the previous trading day, while SK Hynix fell 2.24% to 1,616,000 won.
On August 28, the KOSPI closed down 1.79% at 6,788.88. The MSCI Korea Index exchange-traded fund (ETF) fell by 1.07%, and KOSPI night futures dropped 0.3%, indicating that the domestic market is likely to continue experiencing volatility amid concerns over interest rate hikes and weak semiconductor stocks.
However, analysts suggest that the potential for further declines in the KOSPI may be limited due to low valuations. Lee Kyung-min, a researcher at Daishin Securities, stated, "While the Jackson Hole meeting can be interpreted as hawkish, it leaves an open outcome. The key will be whether the employment and consumer price index (CPI) data released in September align with the criteria for a rate hike." Daishin Securities anticipates that the Fed will keep rates unchanged in September, citing the possibility of inflation easing in August.
Lee added, "The current KOSPI forward price-to-earnings ratio (PER) stands at 5.63, which is near historical lows. Even if a September rate hike is priced in again, the potential for further declines is limited. If market distrust eases, the forward PER could be re-rated to a level of 7 to 8. We expect that in September, downward pressure will be mitigated by valuations, while upward potential will be opened by events."
* This article has been translated by AI.
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