[MarketING] KOSPI Falls to 2560 Amid Renewed Concerns Over Additional Interest Rate Hikes

KOSPI Declines for 3rd Day... Retreats to 2560 Level
KOSDAQ Turns Down After 5 Days... Drops Below 890 Level

The KOSPI has continued its decline for the third consecutive day, retreating to the 2560 level in early trading. This is attributed to growing concerns over additional interest rate hikes following the confirmation of the Federal Reserve's (Fed) rate hike stance through the minutes of the June Federal Open Market Committee (FOMC) meeting. The market is treating a rate hike at the July FOMC as a foregone conclusion, and there are forecasts that further rate increases thereafter would inevitably cause turmoil.

KOSPI Declines for Third Day... KOSDAQ Turns Down After Five Days

As of 10:20 a.m. on the 6th, the KOSPI was at 2,569.77, down 9.23 points (0.36%) from the previous day. The KOSDAQ fell 9.31 points (1.04%) to 881.87.

[Image source=Yonhap News]

This weakness appears to be influenced by the U.S. stock market's decline following the release of the June FOMC minutes. On the 5th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 0.38%, the S&P 500 dropped 0.20%, and the Nasdaq declined 0.18% compared to the previous day.

Han Ji-young, a researcher at Kiwoom Securities, explained, "The U.S. stock market started lower due to U.S.-China geopolitical tensions and China's sluggish services Purchasing Managers' Index (PMI) results, and after the FOMC minutes were released, the increased possibility of a July rate hike dampened investor sentiment, leading to a decline at the close."

The June FOMC minutes released by the Fed reaffirmed the rate hike stance. The Fed stated that the unanimous decision to hold rates steady in June was based on considering the effects of ten consecutive rate hikes and the significant cumulative tightening's lagged impact on economic activity and inflation. Regarding additional rate hikes in the second half of the year, among the 18 participants, 16 supported at least one more hike, and 12 supported two or more hikes, as there was no clear sign that inflation would reach 2%.

Researcher Han analyzed, "The basic stance of Fed officials revealed in the June FOMC minutes appeared to be quite hawkish. Most agreed that additional rate hikes this year are appropriate, and some members advocated for a hike even in June due to a tight labor market and weak signals of inflation returning to 2%, indicating an internal Fed atmosphere favoring further tightening."

Following the release of the minutes, the U.S. 10-year Treasury yield, which had hovered around 3.8%, rose to 3.93%, and the dollar index increased from 102 points to 103 points, reflecting the financial market's caution toward further Fed tightening. Researcher Han noted, "However, the stock market only experienced a mild decline, suggesting that the market views one additional rate hike as manageable."

A rate hike at the July FOMC is being treated as a given. According to the Chicago Mercantile Exchange (CME) FedWatch, the probability of a rate hike in July is 89%. The probability of an additional hike at the September FOMC is in the 18% range, with a rate hold being more likely. However, if the Fed proceeds with further hikes, financial market turmoil is expected. Researcher Han said, "If rates are raised once more at the September or November FOMC, the financial markets, including the stock market, will experience turmoil, undermining the stock market's downside rigidity. In that case, the KOSPI could open down to below 2400 points, but this is only one of the less likely scenarios."

Semiconductor Investment Sentiment Weakens Ahead of Samsung Electronics Earnings Announcement

With Samsung Electronics scheduled to announce its preliminary Q2 earnings on the 7th, cautious sentiment has expanded amid U.S.-China tensions and a decline in ChatGPT traffic, negatively impacting semiconductor investment sentiment.

Seo Sang-young, a researcher at Mirae Asset Securities, said, "The news of China's restrictions on gallium and germanium exports caused the Philadelphia Semiconductor Index to fall 2.20%, which is a burden. However, considering that this was already reflected in the market the previous day and inventory levels, the short-term impact is limited. Nonetheless, the news of decreased ChatGPT traffic is expected to dampen investment sentiment in related stocks."

According to SimilarWeb, a website traffic statistics site, ChatGPT's website traffic in June decreased by 9.7% compared to the previous month. Unique visitors dropped by 5.7%, and the time users spent on the site decreased by 8.5% compared to May. This is the first decline in ChatGPT's visitor numbers since its launch in November last year.

Due to these factors, semiconductor stocks are showing weakness today. Samsung Electronics is trading at 71,900 KRW, down 0.14% from the previous day, while SK Hynix is down 2.14%. Both Samsung Electronics and SK Hynix have been declining for two consecutive days.

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