The KOSPI index, which recently fell below the 6,000 mark due to mixed earnings from major companies and concerns over the profitability of artificial intelligence (AI) investments, is set to face external challenges this week. Attention is focused on the potential resumption of military actions against Iran following the U.S. midterm elections and the impact of declining investor sentiment in the tech sector on the domestic market.
According to the Korea Exchange, the KOSPI closed at 5,730.74 on November 1, up 180.44 points (3.25%) from the previous week. After showing weakness at the beginning of the week, the index surged for two consecutive days midweek, briefly recovering the 6,000 level, but gave back much of those gains by the end of the week. The slowdown in the index's rise was attributed to disappointing earnings from big tech companies, skepticism about AI investments, and foreign selling pressure.
The recent sharp decline in the U.S. stock market is expected to affect the domestic market this week. On October 30, the Dow Jones Industrial Average fell by 1.09% on the New York Stock Exchange. The S&P 500 and Nasdaq Composite also dropped by 1.82% and 2.86%, respectively, following disappointing earnings and outlooks from Alphabet, Amazon, and Intel.
However, some analysts caution against linking the decline in investor sentiment in the AI and semiconductor sectors to a deterioration in fundamentals. They argue that the growth of the AI services market has not necessarily stalled. Factors supporting the expansion of the AI services market and the growth potential for memory demand include revenue growth from Anthropic and solid performance from SK Hynix, along with long-term supply agreements.
The results of the U.S. midterm elections on November 3 and the potential for renewed military actions against Iran are seen as major variables. If military actions escalate, tensions in the Middle East could rise, potentially driving up international oil prices. Various U.S. economic indicators, including the Institute for Supply Management's manufacturing and services purchasing managers' indices (PMI), will also be closely monitored.
Lee Kyung-min, a researcher at Daishin Securities, stated, "While macro volatility should be approached with caution, considering corporate profit growth and valuation attractiveness, the normalization of KOSPI valuations is expected to continue."
* This article has been translated by AI.
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