The U.S. Consumer Price Index (CPI) for July met market expectations, easing inflation and interest rate pressures, while the domestic stock market is expected to rebound, driven by the semiconductor sector. Strong performances from AI infrastructure companies like CoreWeave and Supermicro have alleviated concerns over AI demand, and the strength of U.S. semiconductor stocks is likely to foster a positive investment sentiment in the domestic market. However, with recent focus on semiconductor supply and demand, the continuation of sector rotation will be a key factor in determining further KOSPI gains.
On August 12, U.S. stocks closed mixed. The Dow Jones Industrial Average finished at 35,770.27, down 21.58 points (-0.04%), while the S&P 500 rose by 0.26% to 4,748.50, and the Nasdaq Composite increased by 0.54% to 26,588.49. The Russell 2000 index, which focuses on small-cap stocks, also gained 0.61%. The Philadelphia Semiconductor Index surged by 2.49%.
The U.S. July CPI aligned with market expectations, with the headline CPI rising 3.4% year-over-year and 0.1% month-over-month, while the core CPI increased 2.5% year-over-year and 0.2% month-over-month. The CPI figures, which did not exceed forecasts, have somewhat eased market concerns regarding the Federal Reserve's monetary policy.
Han Ji-young, a researcher at Kiwoom Securities, stated, "The July CPI has at least further alleviated the risk of a Fed rate hike in September, making it a neutral to positive factor for the stock market." Following the CPI announcement, the probability of a rate freeze in September rose from around 52% to 59% in the federal funds futures market.
However, some analysts caution that inflation concerns are not entirely resolved. Temporary factors, such as a drop in accommodation costs following the end of the World Cup, have influenced price stability, while prices for certain services, including healthcare and airfares, have continued to rise. Additionally, international oil prices remain susceptible to geopolitical risks in the Middle East.
A key focus in the domestic market is the strength of U.S. semiconductor stocks. Nvidia rose by 3.03%, Micron increased by 4.92%, and SanDisk climbed by 5.76%. SK Hynix's American Depositary Receipts (ADRs) surged by 9.01%. With the Philadelphia Semiconductor Index up 2.49%, there is a growing likelihood of buying interest in domestic semiconductor stocks.
Expectations for AI infrastructure investment have also risen. CoreWeave and Supermicro reported results that exceeded market expectations and provided strong guidance, highlighting that AI investments are translating into actual server and cloud demand and revenue. CoreWeave and Supermicro saw their stocks jump by 19.28% and 19.02%, respectively.
Seo Sang-young, a researcher at Mirae Asset Securities, noted, "We have confirmed that AI server demand is translating into actual orders, not just expectations," adding that the CPI figures aligned with forecasts have led to a rebound in semiconductor stocks that had recently faced corrections.
Consequently, the rebound of semiconductor stocks, including Samsung Electronics and SK Hynix, will be crucial for the domestic market. If the positive momentum from the U.S. continues, it could support further KOSPI gains, especially for semiconductor stocks that have recently faced concerns over peak AI demand and reduced capital expenditures from big tech companies.
There is also interest in whether buying interest will spread to sectors outside of semiconductors. In August, 24 sectors, including IT electronics, non-ferrous metals, construction, machinery, and IT hardware, have outperformed KOSPI returns. While semiconductors have struggled this month, some sectors are already showing upward trends, suggesting a potential strengthening of sector rotation.
Foreign investor conditions are also improving. The net selling by foreign investors decreased significantly from 48.3 trillion won in June to 9.9 trillion won in July, and by August 12, it had further reduced to around 4.5 trillion won. With the CPI easing interest rate pressures, an improvement in foreign investor conditions could enhance the upward momentum of the domestic market.
Volatility has also decreased positively. The KOSPI Volatility Index (VKOSPI) dropped by 9% to the 56-point range, and it has fallen by about 33% in August. One analyst remarked, "We are currently in a phase of stabilizing volatility and sector rotation," noting that while foreign buying is leading, sectors like automotive, healthcare, securities, and retail, which have yet to see stock prices follow suit, are worth watching.
However, the U.S. Producer Price Index (PPI) set to be released later today remains a short-term variable. Given that some service prices showed renewed increases in the CPI, if the PPI results come in higher than expected, concerns over inflation and interest rates may resurface. Therefore, the domestic market is expected to attempt a rise based on the strength of U.S. semiconductor stocks and expectations for a recovery in AI demand, while adjusting its gains in response to the PPI and sector-specific supply changes.
* This article has been translated by AI.
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