The KOSPI index fell over 1% this week due to renewed geopolitical risks and rising interest rate concerns. Next week, the domestic market is expected to experience increased volatility ahead of U.S. inflation data and the simultaneous expiration of futures and options. Analysts suggest that while the U.S.-Iran conflict and fluctuations in international oil prices may pose short-term challenges, strong semiconductor exports and expectations of a U.S. interest rate freeze could provide support.
According to the Korea Exchange, the KOSPI dropped 1.50% during the week of August 31 to September 4. The KOSDAQ also fell by 2.97% during the same period.
This week, the domestic market faced heightened volatility as geopolitical tensions between the U.S. and Iran escalated. The U.S. conducted direct strikes against Iran, resuming hostilities and diminishing hopes for normalization in the Strait of Hormuz, which led to a sharp rise in international oil prices. Coupled with a rise in global long-term interest rates, the KOSPI plummeted nearly 4% in a single day on September 2.
However, by the end of the week, the rise in U.S. long-term interest rates stabilized, and dovish comments from Federal Reserve officials helped restore some investor sentiment. On September 4, the KOSPI closed at 6,687.21, up 107.73 points (1.64%) from the previous trading day, driven by rebounds in semiconductor stocks such as Samsung Electronics and SK Hynix. Foreign and institutional investors also supported the index's rise, with net purchases of 943.4 billion won and 1.9273 trillion won, respectively.
Market analysts identify U.S. inflation and interest rate trends as key variables for next week. The U.S. is set to release its Producer Price Index (PPI) on September 10 and Consumer Price Index (CPI) on September 11, drawing attention to how these figures may influence the Federal Reserve's monetary policy in September.
Recent disappointing U.S. employment data has emerged as a factor supporting a freeze on interest rates. The ADP private employment report for August showed an increase of only 38,000 jobs, falling short of market expectations, while job openings also came in below forecasts. Coupled with dovish remarks from Fed officials, concerns about a rate hike in September have eased somewhat.
However, rising international oil prices add uncertainty to the inflation outlook. Continued tensions between the U.S. and Iran could lead to higher oil prices and increased inflation expectations, potentially pushing long-term interest rates back up. The U.S. CPI for August is projected to rise by 3.4% year-on-year, and if inflation comes in higher than expected, it could weigh on the stock market.
On a positive note, the fundamentals of the semiconductor sector remain relatively strong. South Korea's exports in August reached $98.3 billion, a 68.7% increase from the previous year, with the average daily export growth rate for semiconductors at 216%. As semiconductor exports continue to perform well, analysts believe there will be little change in profit outlooks for the sector.
Na Jeong-hwan, a researcher at NH Investment & Securities, stated, "Recent stock price volatility has clearly decreased from its peak, and semiconductor fundamentals are in good shape. The semiconductor sector accounts for over 70% of KOSPI net profits, and with the growth rate of semiconductor exports expanding, it is essential to maintain a strategy focused on this sector."
However, next week will see the simultaneous expiration of futures and options on September 10, which could lead to increased short-term volatility due to supply and demand factors. With trading volumes in the domestic market significantly declining, fluctuations in foreign investors' positions in cash and futures could lead to larger index movements.
Na added, "Given the decrease in trading volume coinciding with the simultaneous expiration, short-term stock price volatility may increase depending on the direction of foreign investors' cash and futures investments. While maintaining a focus on semiconductors, it is also important to consider sectors that may benefit from secondary batteries and AI platforms and services if upward momentum slows."
Positive forecasts have also emerged regarding the domestic economy and the won. Samsung Securities highlighted the potential for a large current account surplus due to soaring semiconductor prices to translate into increased domestic consumption through government spending and corporate investment. As a result, they have revised their year-end forecast for the won-dollar exchange rate from 1,380 won to 1,300 won, and for next year, from 1,300 won to 1,250 won.
Heo Jin-wook and Jeong Seong-tae, researchers at Samsung Securities, noted, "The South Korean economy is entering a phase where unprecedented positive terms of trade shocks are materializing due to soaring semiconductor prices driven by a global AI investment boom. We expect that the significant income increase effects will gradually spread throughout the domestic economy as we move through the second half of this year."
* This article has been translated by AI.
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