[Good Morning Stock Market] US Stock Market Falls Amid Sharp Rise in Treasury Yields, Will Korean Market Shake?

US Tech Stocks Fall Over 2% Amid Sharp Rise in Treasury Yields
Semiconductor Sentiment Weakens, High Inflation and Default Concerns Also Negative

Foreign Investors' Influence on Domestic Market Grows
Focus on Sectors Expected to Improve Earnings Through Next Year

[Image source=AP Yonhap News]

[Asia Economy Reporter Minji Lee] As the U.S. stock market experienced a sharp decline centered on tech stocks due to a surge in 10-year Treasury yields, there are forecasts that the domestic stock market may also see a slight drop influenced by related factors.

Sangyoung Seo, Researcher at Mirae Asset Securities: “U.S. stock market tech stocks and semiconductors decline... Domestic market expected to fall around 1%”

On the 28th (current time), the U.S. stock market showed a notable decline centered on tech stocks due to a sharp rise in 10-year Treasury yields. Downgrades in investment opinions on semiconductor equipment companies also dampened risk asset investment sentiment, with the Philadelphia Semiconductor Index plunging about 3.8% in a single day.

Looking at individual stocks, major tech companies such as Microsoft (-3.6%), Alphabet (-3.7%), Amazon (-2.6%), Facebook (-3.6%), and Apple (-2.4%) experienced sharp declines, influenced by a combination of rising Treasury yields, potential corporate tax hikes, and concerns over increased regulation.

Regarding semiconductors, AMAT and ASML fell by 6.9% and 6.6%, respectively, negatively impacted by comments about the peak of the semiconductor equipment business. Microchip Technology (-4.6%) and Micron (-2.7%) also showed weakness due to valuation pressures and the overall decline in the semiconductor sector.

Additionally, early in the trading session, Treasury Secretary Yellen warned of financial crisis risks if the debt ceiling is not raised, and Federal Reserve Chair Powell mentioned that inflation remains higher than expected, both of which negatively affected the indices.

Accordingly, the domestic stock market is expected to show a decline of around 1%, mainly among stocks with excessive valuation burdens, followed by limited fluctuations. However, the possibility of a sharp drop in the domestic market due to these factors is limited. The issues of rising Treasury yields and high inflation concerns were already reflected in the previous day's market, and the corporate tax hike issue and debt ceiling negotiation uncertainties require more time to observe.

Jaeyoon Lee, Researcher at SK Securities: “Focus on sectors with continued earnings improvement through next year”

Operating profit and net profit for the third quarter KOSPI are forecasted at 63.3 trillion KRW and 44.9 trillion KRW, respectively, representing increases of 34.4% and 42% compared to the previous year. However, looking at the changes in estimates over the past month, operating profit and net profit were revised upward by 1.6% and 1.5%, respectively. Fourth-quarter estimates were also revised upward by 0.6% and 1.9%, respectively. Sectors with upward revisions in earnings estimates over the past month for both Q3 and Q4 include healthcare, steel, transportation, IT home appliances, and non-ferrous metals & wood.

However, earnings estimates for next year are being revised downward. By sector, semiconductors, utilities, and software contributed significantly to the downward revisions. The downward revision of semiconductor estimates, which have a large market capitalization weight in the domestic market, due to the decline in DRAM prices, is considered a concern.

With the KOSPI earnings momentum slowing next year, a stock price differentiation phenomenon is expected to emerge among sectors and stocks with strong earnings improvement potential. Since foreign investors have a significant influence on the stock market, attention should be paid to earnings, which are one of the key fundamentals considered by foreign investors.

Therefore, investors need to focus not only on sectors with large upward revisions in earnings estimates for the second half of this year but also for next year. Transportation, steel, and IT home appliances sectors are positive; transportation is expected to see continued increases in sea and air freight rates due to deferred demand and supply shortages. Among IT home appliances, especially secondary battery-related stocks are likely to experience favorable investor sentiment. Steel fundamentals remain solid, but due to ESG concerns, caution is advised for investment.

Sanghyun Park, Researcher at Hi Investment & Securities: “Oil price rise is temporary, should be interpreted as a signal of strengthened economic activity”

Brent crude oil prices have surpassed $80 for the first time in three years, and West Texas Intermediate (WTI) crude has also reached its highest level this year, highlighting the upward trend in international oil prices. Accordingly, global investment banks such as Goldman Sachs have raised their Brent oil price forecasts from $80 to $90, with other investment banks also increasing their outlooks.

The sharp rise in oil prices is primarily due to growing expectations of demand recovery. Oil prices, which had fallen due to concerns over economic slowdown from the resurgence of COVID-19, have risen reflecting expectations of economic rebound entering the with-COVID phase. Additionally, despite rising Treasury yields and a strong dollar, temporary energy supply shortages triggered during the transition to a green economy appear to be fueling the oil price increase.

Although concerns about reduced consumer activity due to rising prices of natural gas and oil are significant, the current oil price level is not judged to be high enough to increase inflation and economic slowdown pressures. Considering real oil prices adjusted for inflation, they are around $27, significantly below early 2010 levels. Given global growth and income increases, an oil price level of $80-$90 is considered manageable. Furthermore, if OPEC (Organization of the Petroleum Exporting Countries) increases production or the U.S. expands shale oil output, the rise in oil prices could be somewhat controlled.

In conclusion, the rise in oil prices should be interpreted as a transitional factor caused by the shift to a green economy and as a signal that economic activity may strengthen again as the global economy enters the with-COVID phase. Therefore, investors should approach the oil price increase as a temporary phenomenon occurring during the implementation of major countries' carbon zero policies and pay attention to sectors that may benefit from the strong push for carbon zero policies worldwide.

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