Inflation Peak Theory Emerges... Will BBIG Stock Gain Momentum?

July CPI Increase Rate Falls Below Market Expectations
KRX BBIG Index Rises Over 12% Since Last Month

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] The US July CPI (Consumer Price Index) increase rate was announced at 8.5%, lower than market expectations, leading to analyses that risk asset preference sentiment will strengthen. In particular, it is expected to provide upward momentum to growth stocks, which have been overlooked in the stock market until now.

At 9:30 AM on the 11th, the KRX BBIG K-New Deal Index was at 2,296.67 points, up 1.8% from the previous trading day. All stocks included in the index showed an upward trend, with Kakao (2.34%), NCSoft (2.92%), SK Innovation (2.62%), and LG Energy Solution (2.18%) leading the gains. Since last month, the performance has reached the 12% range, significantly outperforming the KOSPI's return of 6%. This reflects improved investment sentiment toward growth stocks as views emerged that the rate hike pace would slow due to increased concerns about an economic recession last month. BBIG is composed of major companies selected from the bio, battery, internet, and gaming sector indices, effectively reflecting the stock price trends of domestic growth stocks.

As the US CPI shows a slowdown, the market expects the rally of major growth stocks to continue. Rate hikes have acted as a discount factor on growth stock valuations, but if the US Federal Reserve (Fed) adjusts the pace of rate hikes due to an 'inflation peak-out,' the value of growth stocks could increase further. Nancy Davis, founder of Quadratic Capital Management, said in a media interview, "The slowdown in July CPI will provide considerable relief to the Fed, and if it is confirmed that inflation continues to slow, the Fed may begin to slow the pace of monetary tightening." On the previous day, the Nasdaq index, which is tech-stock focused, closed up sharply by 2.89% at the New York Stock Exchange.

Domestic securities experts also mentioned that heavily fallen growth stocks could gain strength. However, they advised that it is appropriate to devise investment strategies focusing on sectors with noticeable earnings improvements or those less affected by economic slowdown. Jaehwan Heo, a researcher at Eugene Investment & Securities, said, "In a rebound phase, interest tends to rise in sectors or stocks that have risen relatively less, but not all stocks that have fallen significantly will rise," adding, "Attention should be expanded to sectors that can overcome recession concerns."

Recently, earnings have also differentiated the returns by BBIG sector indices. Since last month, KRX Bio and KRX Secondary Battery recorded returns of 14.7% and 14.3%, respectively, while KRX Game (11.4%) and KRX Internet (10.2%) showed lower performance. Experts predict that the bio sector is likely to continue its upward trend in the second half of the year. Seungjin Shin, a researcher at Samsung Securities, said, "Bio is likely to be the leading sector in the second half because growth momentum continues regardless of whether the economic slowdown materializes," adding, "The clinical approval and launch momentum of individual companies' pipelines are important."

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