[Seoul Market Wrap] Institutions Drive 'Weak Open, Strong Close' on November 2nd

U.S. AI Stocks Shock Leads to Weak Open...Institutional Buying Turns the Tide Mid-Session Samsung Electronics and SK Hynix Lead the Rebound, Pension Fund Buying Continues

Key Market Trends

• ① U.S. AI Headwinds Spark Sharp Decline...Most Concerns Based on 'Estimates'

The domestic market opened in the red, impacted by the U.S. tech stock plunge. Amazon and Intel's earnings, along with concerns over Anthropic's funding, weighed on investor sentiment.

Amazon's surplus cash flow over the past 12 months showed a deficit of over $4.2 billion, raising doubts about the timing of recouping its massive AI investment.

Intel's earnings guidance was approximately $1.5 billion lower than market expectations, likely influenced by the Israeli factory fire and supply bottlenecks.

Anthropic also faced funding concerns due to the possibility of a speculative-grade rating in the future. However, the credit rating is not yet confirmed.

Intel's guidance was affected not only by industry conditions but also by production disruptions. Instead, it confirmed the strength of memory prices, leading to a widespread perception that the market overreacted to the early-session headwinds.

② Institutions Lead the Turnaround...Strong Rebound for Samsung Electronics and SK Hynix

The market sentiment shifted after an influx of waiting buy orders in the early trading session.

There were consecutive Wall Street assessments suggesting that the recent excessive decline could present a buying opportunity. 3Fourteen Research indicated the possibility of higher future earnings estimates, while Morgan Stanley evaluated the short-term volatility as a chance for accumulation.

Domestically, institutions led the rebound by turning net buyers in almost all sectors. Notably, the National Pension Service continued its buying spree, following the second-largest single-day net purchase on record last Friday.

Samsung Electronics and SK Hynix staged a strong comeback, with semiconductor materials, components, and equipment stocks rising in tandem. The shipbuilding, fitting, steel, and construction sectors also exhibited strength.

Foreign investors opted to sell electric & electronics, retail, and financial stocks, while buying machinery, construction, transportation & warehousing, and IT services. On the KOSDAQ, institutions were net buyers of machinery, electric & electronics, and chemical stocks.

③ Oil Prices Plunge as Iran Tensions Ease, Boosting Risk Appetite

Market Sentiment Boosted by Easing Tensions

The easing of tensions related to the Middle East provided a tailwind for the markets. Secretary of State Marco Rubio's statement favoring negotiations over military action has led to a widespread belief that the possibility of an Iranian airstrike is not yet certain.

International oil prices declined by approximately 3%. The drop in oil prices positively impacted tech stock sentiment, as there were concerns that rising oil prices could increase inflation and interest rates, thereby raising the cost of funding for AI companies.

Supply and Demand Dynamics, Sector Performance

Institutional investors were at the heart of the day's rebound. Institutions were net buyers across most sectors, and the National Pension Service also demonstrated strong buying momentum for the second consecutive day.

The semiconductor sector, led by Samsung Electronics and SK Hynix, rebounded, quickly recovering from early session losses. Notably, the rise extended beyond semiconductor equipment and materials to other sectors, including shipbuilding, fitting, steel, and construction.

Foreign investors were net sellers in the electrical and electronics sector but showed buying interest in certain industries, such as machinery and construction. It is worth noting that, despite the index rebound, foreign investors did not shift to buying semiconductors, which requires further analysis.

Market Watch

This week, the market will be keeping a close eye on a busy calendar of events, including the US midterm elections, earnings from major companies like AMD, and key employment indicators. Additionally, factors such as AI investment costs, interest rates, and international oil prices are all coming into play, making it challenging for investor sentiment to move in a single direction.

However, most of the recent negative developments have been recurring issues since last year. Concerns over AI investment costs and funding are not new problems but rather have been triggered by earnings announcements, causing a sensitive reaction.

Today's "weak start, strong finish" performance in the domestic market is significant as it indicates actual buying interest entering the market. Notably, while foreign investors were selling off the electrical and electronics sector, institutions and pension funds stepped in with buying, leading to a rebound in Samsung Electronics and SK Hynix.

Determining the exact market bottom is difficult. As we navigate through earnings season and the midterm elections, reducing uncertainty step by step, it is essential to utilize market volatility to differentiate between existing market leaders, stocks with strong earnings evaluations, stocks with accumulated institutional buying, and companies directly benefiting from expanded AI investments.

Bloomberg | Wall Street Journal

Late-Session Selling Pressure Erased Intraday Gains

"The market witnessed a late-session selling pressure, erasing earlier gains. Investors were met with margin call liquidations, causing a decline in the overall market sentiment."

### Market Snapshot:

- **Date:** January 15th, 2024

- **Index Performance:** The benchmark index ended the day down 0.6%, with commercialization weighing on the market.

### Sector Performance:

- **Technology:** Tech stocks faced a challenging day, with [Tech Company A] leading the losses, down 2.3%.

- **Energy:** Despite a brief rally, energy stocks gave back their gains, with [Energy Firm] closing 1.2% lower.

### Key Takeaways:

- Late-session selling pressure indicates a potential shift in market sentiment.

- Margin call liquidations suggest a need for caution as investors navigate volatile conditions.

### Outlook:

As we head into the new week, yield rates and economic data will be closely watched, influencing market direction.