The KOSPI index dropped over 5% this week, entering a period of consolidation. Next week, the domestic stock market is expected to focus on U.S. inflation indicators, foreign investment flows, and the recovery of semiconductor investment sentiment. Analysts suggest that while earnings improvement continues, profit-taking after a short-term surge may lead to ongoing volatility.
According to the Korea Exchange, the KOSPI fell 5.10% during the week of August 3-7. In contrast, the KOSDAQ rose 10.98%, buoyed by individual investor inflows.
This week’s stock market exhibited high volatility, driven by expectations for semiconductor earnings and profit-taking. The KOSPI, which had surged last week following announcements of significant AI investments by major global tech firms, saw its upward momentum wane as foreign selling intensified. On August 7, the KOSPI opened more than 1% higher but closed down at 6258.77 after foreign investors sold a net 862.5 billion won.
Market analysts identify the sustainability of the U.S. AI investment cycle as a key variable. Major tech companies like Microsoft, Amazon, and Meta reaffirmed their commitment to expanding capital expenditures (CAPEX) for AI infrastructure in their recent earnings reports. However, attention is shifting from the scale of investment to the return on investment and cash flow.
Domestic corporate earnings remain strong, with KOSPI net profit estimates recently revised upward. Earnings forecasts for companies excluding Samsung Electronics and SK Hynix are also improving. The broadening of earnings improvement beyond semiconductors to include industrial goods is seen as a factor supporting the domestic stock market.
However, foreign investment remains a variable. Recently, foreign investors have turned to net selling in the spot market, and there has been a lack of aggressive buying in the futures market. Although volatility in domestic supply and demand has eased significantly since the regulation of single-stock leveraged ETFs, analysts suggest that institutional catalysts, such as the clarification of shareholder return policies, are needed for substantial foreign capital inflows.
Next week, key U.S. economic indicators, including the Consumer Price Index (CPI), Producer Price Index (PPI), and retail sales for July, will be released. The market anticipates that if inflation comes in higher than expected, it could lead to rising long-term interest rates and a stronger dollar, putting pressure on foreign investment. Conversely, if inflation stabilizes, expectations for increased AI investment and improved semiconductor earnings may resurface.
Analysts believe that the current adjustment is more related to valuation pressures and profit-taking rather than a deterioration in earnings. With profit estimates for the semiconductor sector continuing to rise, it is considered premature to declare a trend reversal.
Na Jeong-hwan, a researcher at NH Investment & Securities, stated, "While volatility from leveraged ETFs has eased significantly, additional foreign capital inflows will require institutional catalysts such as the clarification of shareholder return policies or tax reforms. The hedge positions remaining in the U.S. memory semiconductor options market also remain a short-term volatility factor."
Lee Jae-won, a researcher at Yuanta Securities, noted, "The current market is in a phase of verifying the profitability and sustainability of AI investments rather than assessing earnings deterioration. For a future trend rebound, the return of foreign net buying, along with U.S. inflation indicators, long-term interest rates, and the alleviation of geopolitical risks, will be crucial factors."
* This article has been translated by AI.
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