[Good Morning Stock Market] Philadelphia Semiconductor Index Falls... Will Profit-Taking Sell-Offs Emerge?

Philadelphia Semiconductor Index Falls 2.5%
High Possibility of Profit-Taking Selling in Korean Stock Market

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] Due to the decline in the U.S. stock market, there is a high possibility of profit-taking selling pressure in the domestic stock market as well. On the 19th (local time), the U.S. stock market closed slightly lower following a pullback after the Dow Jones and S&P 500 indices hit all-time highs last Friday. The Dow Jones and S&P 500 indices fell by 0.4% and 0.5%, respectively, while the Nasdaq index closed down over 1% due to the decline in tech stocks.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = Tech stocks were affected by issues in the semiconductor sector and individual companies. Additionally, increased volatility in Bitcoin and cryptocurrencies, as well as a sharp drop in Tesla shares due to accident news, weighed on the overall U.S. stock market.

Tesla experienced a decline of over 3% after a suspected autonomous driving accident was reported in Texas over the past weekend. The fact that U.S. regulatory authorities have launched an investigation into the related accident, raising concerns that the pace of innovation in autonomous vehicles may slow down, acted as a burden. Nvidia saw a decline of about 3.5% after news emerged that its acquisition of chip design company ARM Holdings has hit obstacles. The UK regulatory authorities are reviewing the impact of the ARM acquisition on national security, with results expected to be announced by the end of July.

The Philadelphia Semiconductor Index, which had rebounded rapidly until early April, fell sharply, closing down 2.5%, as Republican calls for infrastructure cuts, friction involving Nvidia, and concerns over excessive valuation burdens through Qualcomm came to the forefront. Currently, the Republican Party is advocating for the removal of sectors unrelated to traditional infrastructure, such as electric vehicles, IT infrastructure, and care for workers and the elderly related to Obamacare, from the Biden administration’s infrastructure investment plan.

On this day, the domestic stock market is likely to see some selling pressure centered on tech stocks due to rising U.S. interest rates. In particular, considering the decline in the Philadelphia Semiconductor Index and the possibility of reduced IT-related infrastructure investment in the U.S., the likelihood of profit-taking selling pressure is estimated to be high. However, the sharp rise in international oil and copper prices and the weakening of the dollar are expected to have a positive impact on foreign investors’ supply and demand. Although the possibility of selling pressure is high, it is predicted that companies and sectors with improving earnings will show strength.

◆ Jeong Inji, Researcher at Yuanta Securities = For the KOSPI to surpass the 3,200 mark on a closing basis, stronger buying momentum is likely needed. Although the KOSPI has exceeded 3,200 points intraday for three consecutive days, it has not been able to close above 3,200 points.

On January 11, when the KOSPI recorded an intraday high of 3,266 points, the intraday fluctuation range was 5.4%, and the trading volume was around 44 trillion won. The average difference between the intraday high and low this month is 0.78%, with a trading volume of 14.8599 trillion won. On January 11, the average intraday fluctuation rate was seven times stronger, and the trading volume was about three times higher than the current level. This indicates that there was sufficient selling pressure, meaning that a significant influx of buying momentum is necessary for the index to hit a new yearly high this month.

However, the upward trend is expected to be gradual. Looking at recent supply and demand characteristics, foreign investors have formed buying momentum while pension fund selling pressure has eased. Since trading volume has not increased significantly, the possibility of increased index volatility is low, and a gradual upward trend is expected to continue.

◆ Sanghyun Park, Researcher at Hi Investment & Securities = The weight of opinion is leaning toward a 4% growth rate this year. After the Monetary Policy Committee meeting on the 15th, Bank of Korea Governor Lee Ju-yeol stated that “an annual growth rate in the mid-3% range is possible for domestic economic growth,” significantly raising the likelihood of an upward revision from the previous 3% growth forecast.

Considering President Moon Jae-in’s remarks that exports and investments are recovering faster than expected, the first-quarter GDP growth rate is expected to recover by about 1.3% quarter-on-quarter. Although uncertainty risks in the domestic consumption economy due to COVID-19 have not been resolved, the domestic export economy is expected to benefit from strong rebounds in the U.S. and Chinese economies, a strong rebound in the manufacturing business cycle centered on IT, and the effects of supplementary budgets.

According to Bloomberg’s survey of this year’s domestic GDP growth rate, the average remains around 3.5%, but recent growth forecasts have been revised upward. Capital Economics has presented the highest growth forecast at 5%, while USB and Morgan Stanley have forecasted 4.8% and 4.2%, respectively.

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