Semiconductors and Won-Dollar Exchange... "Can It Get Any Worse Than This?"

Semiconductors, Pre-Reflected Negative Factors
Exchange Rate, Limited Upward Pressure

[Asia Economy Reporter Junho Hwang] Last week, the KOSPI fell below the 3,200 level again. After 54 trading days (since May 28), it dropped to the 3,100 level. The stock market declined due to massive net selling by foreign investors. Foreigners withdrew a record amount of 7.0262 trillion KRW over the past week. Various reasons have been cited, including the worsening semiconductor market conditions, the rise in the KRW/USD exchange rate, and the number of COVID-19 cases surpassing 2,000. Amid this, there is a forecast that the domestic stock market, starting from the 17th, will have a week of bottoming out.

Pre-reflected Negative Factors

Lee Kyung-min, a researcher at Daishin Securities, said, "Last week's market situation was the worst since the COVID-19 pandemic or the financial crisis," adding, "If the current situation has pre-reflected the worst future scenario, it could be an opportunity from a strategic response perspective." He particularly diagnosed, "The semiconductor sector, which shook the KOSPI market last week, is in an undershooting phase, and the KRW/USD exchange rate has entered an overshooting zone."

However, since investor sentiment and supply-demand conditions are severely weakened and short-term volatility has expanded sharply, aftershocks must be considered. But after the short-term shooting up, a return to an appropriate value level can be expected. His judgment is that if the current strategic stance is strengthened, only a battle against time remains.

In the semiconductor sector, the market capitalization decreased by 43.13 trillion KRW over three trading days last week. The operating profit forecast for this sector this year and next year is 66.3 trillion KRW and 80.4 trillion KRW, respectively. When reflecting the consensus lowest estimates, the operating profit forecast for this year and next year drops to 62.5 trillion KRW and 61.2 trillion KRW. This represents a downward revision of 22.21 trillion KRW over two years combined. It can be seen as reflecting the worst situation in terms of market conditions and performance in a short period. He said, "Even excluding debates about semiconductor demand/supply, market conditions, and performance, I believe the stock price and value of the semiconductor sector are in an extremely undervalued and oversold area."

Relief of Upward Pressure on KRW/USD Exchange Rate

Chae Hyun-gi, a researcher at Cape Investment & Securities, said, "Considering the rebound in the stock price of Micron in the US and the Philadelphia Semiconductor Index last Friday, it is highly likely that the domestic semiconductor sector will not continue to decline and will form a bottom." However, he diagnosed, "Since concerns remain that the semiconductor market conditions may be sluggish, the stock price is expected to continue sideways rather than rebound."

He particularly analyzed, "Last week, due to the possibility of tapering within the year, the US 10-year Treasury yield rose to the 1.37% range, and the dollar index reached 93 points. However, as the University of Michigan consumer sentiment index plummeted, the market interest rate and dollar index fell to the 1.2% range and 92 points, respectively," adding, "With the easing of upward pressure on the KRW/USD exchange rate, foreign investor supply and demand could also be favorable."

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