Growing expectations for a U.S. rate cut...KOSPI closes higher

Korea Economic Daily

Summary

It reported that growing expectations for a U.S. rate cut pushed the KOSPI and KOSDAQ up for four consecutive days.
It noted that the semiconductor sector and biotech stocks showed strength, with notable gains in SK Hynix and major biotech names.
It reported that the U.S. nonfarm payrolls release prompted a strong wait-and-see sentiment, limiting the indices' gains.

Fourth consecutive gain…KOSDAQ also breaks 811

U.S. private employment slowdown raises odds of a cut

SK Hynix and biotech stocks surge together

Expectations for a U.S. benchmark rate cut grew, pushing the KOSPI and KOSDAQ up for the fourth straight day. However, with the U.S. nonfarm payrolls release looming, investors adopted a wait-and-see stance, limiting the gains.

On the 5th, the KOSPI closed at 3205.12, up 0.13%. The KOSDAQ also closed at 811.40, up 0.74%.

The four-day winning streak reflects rising odds of a September rate cut in the U.S. the previous day, Automatic Data Processing (ADP) reported that private-sector employment in the U.S. increased by 54,000 in August from the prior month. The increase was about half of July's 104,000 and fell short of the 75,000 forecast compiled by Dow Jones.

After that release, the probability of a September rate cut as measured by the CME FedWatch rose to 99%. Lee Kyung-min, an analyst at Daishin Securities, said, "This employment data can be interpreted as 'the U.S. central bank (Fed) seeing enough economic slowdown to consider cutting rates, but not enough to say the economy has entered a recession,' which led to simultaneous gains in U.S. and Asian markets."

The semiconductor sector showed notable gains. SK Hynix closed at 273,500 won, up 3.01%. The rally was influenced by U.S. Broadcom's strong results the previous day and news that SK Hynix's Q2 DRAM market share (39.5%) ranked first globally. Foreign investors, who net sold 156.6 billion won on the KOSPI, concentrated purchases on SK Hynix amounting to 284 billion won.

Biotech stocks also strengthened on growing expectations of a U.S. rate cut. L&C Bio (29.89%), ABL Bio (7.85%), and HLB (2.79%) all rose in tandem.

However, with the U.S. Department of Labor's nonfarm payrolls report—known to have significant influence on the Fed's rate decision—scheduled for release that evening, the market's upside was limited. Wall Street's consensus estimate for the U.S. unemployment rate is 4.3%. While not at recession levels, the figures could give the U.S. Fed justification to cut the benchmark rate. Conversely, if employment falls more than expected and unemployment rises, concerns about a recession could increase and negatively affect the markets.

Reporter Seongmi Shim smshim@hankyung.com