[Seoul Market Wrap] Investor Confidence Plunges Ahead of Super Week

Geopolitical Tensions, High Oil Prices, and Big Tech Earnings Keep Markets on Edge; FOMC Meeting and SK Hynix's Performance in Focus as Investors Brace for a Volatile Week.

Key Market Developments

• ① Geopolitical Unrest in the Middle East Drives Oil Prices Higher, Weighing on Domestic Markets

The weekend's geopolitical tensions in the Middle East sent shockwaves through global markets, with oil prices surging as a result. The ongoing discussion of a potential U.S. attack on Iran has pushed international oil prices to their highest levels since the Iran War, creating a volatile environment.

While oil prices retreated slightly on the day, they remain elevated, with no additional adverse news emerging. The high energy import dependency of South Korea's economy makes elevated oil prices a significant concern, impacting the domestic stock market.

The combination of policy uncertainty post-U.S. midterm elections, geopolitical instability following the Brazilian elections, and now the Middle East tensions, has further dampened investor sentiment towards emerging markets.

• ② SK Hynix Rebounds Intraday but Loses Momentum as Trading Progresses

SK Hynix, which rebounded in the U.S. markets over the weekend, continued to exhibit high volatility on this trading day.

Despite an intraday rebound, the stock struggled to maintain its gains, with late-session selling pressure erasing some of the earlier advances. The commercialization of AI technologies and the impact of rising interest rates on the semiconductor industry are expected to be key themes for investors to focus on in the days leading up to Thursday's FOMC meeting.

Late-session Selling Pressure Erases Intraday Gains

SK hynix saw its shares rise during the session, driven by reports of a special dividend plan utilizing the profits from its Kioxia investment. However, the company disclosed that these details were not yet finalized, leading to a slowdown in its upward momentum.

The news of SpaceX's successful $400 billion funding round also impacted the AI investment sentiment. While the large-scale funding is a positive sign, the mention of securing funds in a challenging environment highlights the difficult financing conditions for AI infrastructure companies.

A majority of sectors, including materials, securities, and pharmaceuticals, experienced declines. Meanwhile, some robot stocks and inter-Korean economic cooperation-related shares showed strength.

Foreign Investors Turn to Selling in the Tech Sector Again... Super Week Ahead, Market Cautious

Foreign investors sold off electrical and electronics, financials, and food & beverage stocks, while buying metals, construction, and chemicals.

In the KOSDAQ market, they purchased machinery and equipment, and sold electrical and electronics, and pharmaceuticals.

Institutions bought electrical and electronics, financials, retail, and transportation equipment, and sold metals, chemicals, and construction.

On the KOSDAQ, institutions sold machinery and electrical equipment, and bought transportation equipment.

Supply and Sector Dynamics

The domestic market has seen a weakened supply base due to a decline in customer deposits and limited participation from pension funds.

In this environment, the direction of foreign investor trading has led to significant fluctuations in large-cap stocks and the overall index. On this particular day, foreign investors net sold the electrical and electronics sector, while institutions bought, creating a divergence in the supply dynamics surrounding large-scale semiconductors.

With many sectors, including small and medium-sized businesses, securities, and pharmaceuticals, experiencing declines, the overall market sentiment, as felt by individual investors, is weaker than the index suggests.

Market Outlook

This week holds several key events that will determine the market's direction. Major AI-related companies will release their earnings reports, with Microsoft's earnings and the FOMC meeting taking center stage on Thursday, alongside SK Hynix's earnings.

On Friday, Amazon, Intel, and SanDisk's earnings are scheduled, along with the release of the US PCE inflation data. Domestically, Samsung Electronics' earnings and conference call will take place, with a particular focus on the messages conveyed by Samsung and SK Hynix regarding shareholder returns, future investments, and demand forecasts. These messages could significantly impact the short-term volatility of the domestic market.

Market Sensitivity and Potential Volatility

The market's recent behavior suggests heightened sensitivity to capital expenditures, cash flow, and financing issues, rather than solely focusing on strong earnings. With the upcoming FOMC meeting and its potential impact, both AI stocks and interest rates could experience significant movements. Given the proximity to the U.S. midterm elections early next month, we can expect heightened market volatility, with individual stocks reacting more intensely to news and updates.

However, some analysts argue that a considerable portion of negative news has already been priced into the market. For instance, Goldman Sachs believes that the current concerns over semiconductor stocks, with projected profit declines of over 60% next year, are already reflected in their valuations. With decreasing client deposits and limited pension fund inflows, a strong rebound from the bottom is unlikely. Considering the recent price drops and levels, it is essential to monitor the movements of existing leading stocks and those with strong earnings evaluations.

Reference: t.me/shmstory

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Bloomberg: Late-Session Selling Pressure Erased Intraday Gains

"Despite early trade optimism, the market faced late-session selling pressure, erasing earlier gains. Margin call liquidations and profit-taking strategies dominated the latter half of the trading day, leading to a reversal in the market's trajectory."

Market Overview:

• Yield rates on government bonds witnessed a slight increase, impacting the overall sentiment.
• Commercialization efforts by major institutions seemed to wane as the day progressed.

"As we analyze the market's performance, it's crucial to note that these movements are subject to various factors and may not indicate long-term trends. Investors should exercise caution and avoid making impulsive decisions based solely on intraday fluctuations."


"The above graph illustrates the market's volatility, showcasing the late-session sell-off. Such movements highlight the importance of a disciplined investment approach."

Key Takeaways:

• Late-session selling pressure can significantly impact intraday gains.
• Margin call liquidations and profit realization strategies often drive market reversals.
• Yield rates and institutional activities play a vital role in market sentiment.

"Stay tuned for further insights and analysis as we navigate the dynamic world of finance. Remember, Bloomberg News is your trusted source for comprehensive financial coverage."