Nvidia's strong performance fueled expectations for the artificial intelligence (AI) investment cycle, but the potential imposition of semiconductor tariffs by the U.S. weighed on the domestic stock market. With the Bank of Korea's interest rate hike confirming increased domestic borrowing costs, upcoming U.S. employment and manufacturing data, along with Broadcom's earnings, will be closely watched. Analysts believe that the ability of AI companies to offset high-interest burdens will be a key factor for the stock market in September.
According to the Korea Exchange, on the 28th, the KOSPI closed at 6,788.88, down 123.49 points (1.79%) from the previous trading day, while the KOSDAQ rose 0.76 points (0.09%) to finish at 838.41. Over the week from August 24 to 28, the KOSPI fell 1.79%, while the KOSDAQ gained 4.55%.
This week, the stock market exhibited a clash between strong AI earnings and uncertainties surrounding interest rates and trade. Nvidia's results and guidance exceeded market expectations, reaffirming the sustainability of the AI investment cycle. However, news of the U.S. considering comprehensive tariffs on semiconductors led to weakness in domestic semiconductor stocks.
Shareholder return effects supported the lower end of the index. Stock buybacks by SK Hynix and Samsung Electronics attracted institutional buying, absorbing some of the foreign selling pressure.
In the global financial market, rising long-term U.S. interest rates posed a burden, while domestically, the Bank of Korea raised the benchmark interest rate from 2.75% to 3.00% on the 27th, marking the second consecutive month of increases. The growth forecast for this year was significantly raised from 2.6% to 3.3%. The Bank of Korea anticipates increased exports and investment due to a robust semiconductor market and a recovery in domestic demand, but it also expects inflation to remain above target levels for an extended period, prompting preemptive measures. The central bank indicated it would decide on the timing and pace of future rate hikes.
While the improved outlook for the economy and semiconductor performance is positive, continued interest rate hikes could increase the discount rate burden on the domestic stock market. However, the market leans toward the possibility that the pace of additional tightening will slow after consecutive hikes. The Monetary Policy Committee changed its language from needing to maintain a 'rate hike stance' to determining the 'timing and pace of additional hikes.'
Next week, key economic indicators will shape the direction of the September stock market. The August export figures for South Korea, set to be released on September 1, will be crucial in assessing how much semiconductor exports have boosted overall export growth. On the same day, the U.S. will release the August Institute for Supply Management (ISM) manufacturing index and the July Job Openings and Labor Turnover Survey (JOLTs), which will provide insights into economic resilience and labor market slowdowns.
On September 2, Broadcom's earnings and the Federal Reserve's Beige Book will be published. Following Nvidia, the performance of AI semiconductor and infrastructure companies will be examined to see if AI investments are translating into individual company revenues and profits. On September 3, the U.S. will release the August ISM services index and July trade figures, followed by the August employment report on September 4. The employment report is particularly significant as it will be a key indicator for the Federal Open Market Committee's (FOMC) interest rate trajectory; a slowdown in employment could alleviate interest rate pressures.
The first week of September is expected to see a tug-of-war between AI earnings momentum and interest rate burdens. If U.S. employment slows and long-term interest rates stabilize, the upward trend may extend from semiconductors to secondary batteries and AI platforms and infrastructure. Conversely, if long-term interest rates rise again or U.S. trade pressures increase, valuation burdens may resurface despite strong AI earnings.
Shin Eul, a researcher at Simgangin Securities, stated, 'Next week's market will be a process of confirming whether AI earnings can offset high-interest burdens. If the earnings momentum of AI is maintained and long-term U.S. Treasury rates stabilize, there is potential for further gains in risk assets. However, if rates rise again, the differentiation within AI sectors will accelerate.'
Advice has also emerged suggesting a focus on sectors and individual stocks rather than indices. Na Jeong-hwan, a researcher at NH Investment & Securities, noted, 'If the growth trend from AI infrastructure investments continues and concerns about rising interest rates are alleviated, an additional relief rally is possible. While maintaining semiconductors as a core sector, we recommend considering secondary batteries and AI platforms and services as potential areas for expansion.'
* This article has been translated by AI.
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