[Good Morning Stock Market] Tesla's Comeback on US Interest Rate Stability... Will Domestic Growth Stocks Rebound?

Nasdaq Soars 3.5% in US... Tesla Stock Up 19%
Domestic Market Expected to Start Higher
Bitcoin Price Also Expected to Rise

[Asia Economy Reporter Ji Yeon-jin] On the 9th (local time), when U.S. Treasury yields showed stability, the stock market surged, led by the Nasdaq. Growth stocks such as large-cap tech, semiconductors, and electric vehicles, which had recently plunged, led the rise, while the announcement that the U.S. House of Representatives would vote on additional stimulus measures on the 10th fueled investor sentiment.

At the New York Stock Exchange, the Nasdaq index closed up 3.59% from the previous day, while the Dow Jones and S&P 500 rose 0.10% and 1.42%, respectively. On the same day, the U.S. 10-year Treasury yield recorded 1.526%, down 6.4 basis points from the previous day.

◆ Sangyoung Seo, Kiwoom Securities Analyst = Contrary to concerns, strong demand appeared in the U.S. 3-year Treasury auction, leading to yield stability. This drove a sharp rise due to panic buying inflows into large-cap tech, semiconductors, electric vehicles, solar power, and Bitcoin-related stocks that had recently plunged. Rather than a sharp drop, Treasury yields are stabilizing. With the 10-year and 30-year auctions still ahead, a cautious stance remains dominant. Also, the increased likelihood of passing the $1.9 trillion stimulus package limits further yield declines.

The House announced plans to vote on the stimulus package passed by the Senate on the 10th (local time). Although progressive lawmakers criticized the Senate stimulus package, they still expressed support, making its passage certain, and President Biden is expected to sign it promptly.

If the stimulus is implemented, it cannot be ruled out that it may stimulate yield increases and inflationary pressures. For this reason, value stocks underperformed but with limited declines. Ultimately, the U.S. stock market showed strength as panic buying flowed into recently plunged growth stocks due to yield stability, while value stocks lagged due to profit-taking.

[Image source=Yonhap News]

Tesla (+19.64%) surged due to the drop in Treasury yields and rebound buying following recent corrections. Additionally, a surge in electric vehicle sales in China the previous day (Tesla sold 18,300 units) had a positive impact. Nio (+17.44%) and Xiaopeng (+11.33%) also rose sharply, along with secondary battery companies QuantumScape (+13.46%) and Albemarle (+3.61%). Treasury yield stability led to gains in other theme stocks that had plunged. Bitcoin-related stocks such as MicroStrategy (+14.71%), Square (+11.50%), PayPal (+6.93%), and Nvidia (+8.03%) rose, as did solar stocks First Solar (+7.31%), SunPower (+10.86%), JinkoSolar (+22.06%), semiconductor stocks Micron (+5.00%), Qualcomm (+4.80%), Broadcom (+5.31%), and large-cap tech stocks Apple (+4.06%), Microsoft (+2.81%), Alphabet (+1.64%), and Amazon (+3.76%).

On the other hand, financial stocks such as JPMorgan (-0.71%) and Bank of America (-2.18%) underperformed due to yield declines, while energy stocks ExxonMobil (-1.54%) and ConocoPhillips (-1.50%) and mining stocks Freeport-McMoRan (-1.66%) also lagged amid commodity price drops.

The sharp rise in U.S. large-cap tech, semiconductor, and electric vehicle-related stocks is expected to positively influence domestic investor sentiment. The stabilization of Treasury yields and the imminent passage of additional U.S. stimulus are also expected to positively affect foreign capital flows. Especially given the composition of Korean stock market sectors, the rise in semiconductor and secondary battery sectors, which are strong in the U.S. market, is expected to lead to a significant rise at the start of the Korean stock market.

◆ Yoojun Choi, Shinhan Financial Investment Market Analyst = The domestic stock market showed weakness centered on growth stocks influenced by the Nasdaq decline the previous day. After the Chinese market opened, tech stocks weakened, causing the KOSPI to widen its intraday losses to over 2%. The official depreciation of the yuan also acted as an additional weakening factor. However, buying inflows from Hong Kong to mainland China and public funds defending stock prices helped the Shanghai Composite Index reduce losses, and the KOSPI also narrowed its losses to close.

Due to Tesla's recent weakness, investment sentiment toward the domestic secondary battery value chain sector weakened, leading to declines. Steel, metals, and chemical sectors, which had been rising recently, also weakened due to profit-taking amid risk aversion. In the afternoon, banking and insurance sectors benefiting from rising yields and construction sectors with institutional bargain buying reversed to gains, while the shipbuilding sector showed strength amid continued large-scale order news. The KOSDAQ, centered on growth stocks, closed below 900 points, led by declines in pharmaceutical/biotech and semiconductor sectors.

The exchange rate rose to the 1,140 won level for the first time in four months. The poor bid rate for the 7-year U.S. Treasury auction on the 25th of last month acted as downward pressure on the stock market. With long-term U.S. Treasury auctions such as the 10-year and 30-year scheduled this week and the blackout period, the impact of bid rates on the stock market is expected to be greater.

◆ Daehun Han, SK Securities Analyst = Market volatility is expanding depending on the direction of the U.S. 10-year Treasury yield. Despite the Federal Reserve's efforts to soothe the market, concerns about Fed tightening due to rising U.S. yields are serving as an excuse for profit-taking after the short-term sharp rise in tech stocks.

On the other hand, Bitcoin prices are rising regardless of the U.S. 10-year Treasury yield. Bitcoin prices have surpassed $54,000 and exceeded 62 million won in Korean won terms. Increased demand from global tech companies and financial institutions is driving Bitcoin price increases.

Bitcoin has an inelastic supply curve limited to 21 million units, so price volatility is large due to demand increases. Currently, demand is rising, leading to price increases.

It is now the era of institutional investors. Tech companies opened the door, and leading financial firms are entering the market to keep pace. Canada was the first country to approve a Bitcoin ETF, which has gained great popularity as a physical ETF. The third ETF is already scheduled to be launched in Canada, and the Bitcoin inflow into Canada due to the ETF effect has exceeded 12,000 units. PayPal acquired custody firm Curv, and the possibility of Apple and Netflix entering the market is steadily being raised, so institutional investors' market entry is expected to accelerate further.

In fact, the amount of Bitcoin held by existing cryptocurrency exchanges has steadily decreased. According to CryptoQuant data, the estimated Bitcoin holdings of exchanges, which were about 3 million units in May last year, have decreased to around 2.4 million units currently. These were purchased by tech and financial institutions. Expectations for institutionalization and asset class inclusion remain high and are confirmed by data. A positive outlook is maintained.

This content was produced with the assistance of AI translation services.