'Semiconductor stocks,' the drivers of KOSPI's record highs, can they overcome the burden of a short-term surge and go further? [Weekly Outlook]

The KOSPI has continued its streak of record highs day after day. Just before the holidays it broke above the 3,500 level, and as soon as the holidays ended it surpassed the 3,600 level. This was thanks to a strong artificial intelligence (AI) rally during the holiday period.

As stock prices have risen sharply, caution has also intensified. Before the AI rally, concerns about an 'AI bubble' resurfaced, and the possibility of a U.S. federal government shutdown and the won–dollar exchange rate breaking past 1,420 won per dollar are also sources of unease.

However, expectations are growing that the earnings season starting this week (13–17) will bring strong corporate results, allowing the upward trend in stock prices to continue.

According to the Korea Exchange on the 12th, on the 10th the KOSPI closed at 3,610.60, up 1.73%. As before the holiday, on the 10th Samsung Electronics and SK hynix surged by 6.07% and 8.22% respectively, lifting the index. Just before the holiday, on the 2nd, Samsung Electronics and SK hynix rose by 3.49% and 9.86% respectively. Over the two trading days of the 2nd and 10th, Samsung Electronics rose 9.77% and SK hynix rose 18.89%.

Although buying pressure on semiconductor stocks has caused the index to rise sharply in a short period, securities firms expect the upward trend may continue this week because the earnings season is beginning.

On the 14th, Samsung Electronics will release its preliminary results. The consensus for third-quarter operating profit (average of securities firms' estimates) has been raised to 10.0898 trillion won. Na Jeong-hwan, a researcher at NH Investment & Securities, said, "Although domestic semiconductor sector stock prices have risen sharply recently, profit forecasts for the semiconductor sector have also been revised upward," and predicted, "The positive trend will continue."

If AI-related companies report strong third-quarter results, it is expected that concerns about an 'AI bubble,' which flared up again in the early part of the Chuseok holiday period, may subside for a while. Han Ji-young, a researcher at Kiwoom Securities, said, "So far, most market participants seem to view the price increases of AI-related stocks as being supported by earnings, which differentiates them from the dot-com bubble," and analyzed, "Earnings reports from major hyperscalers such as Microsoft, Meta Platforms, and Amazon, scheduled from late October, will be a new 'turning point.'"

There is growing weight behind the analysis that the won–dollar exchange rate surpassing 1,420 won per dollar is not bad enough to derail the market's upward trend. Han said, "Unlike past crisis periods when the won–dollar exchange rate spiked, Korea's country risk measure, the credit default swap (CDS) premium, remains at a relatively low level," and added, "There are limits to viewing the recent exchange rate surge as stemming from a deterioration in Korea's economic fundamentals."

There are also concerns that a prolonged U.S. federal government shutdown could act as a negative factor weakening expectations for a rate cut by the U.S. central bank (the Fed). This is because the release of the U.S. September consumer price index (CPI), scheduled for the 15th (local time), could be delayed. Without confirmation of the inflation data, the Fed would inevitably feel burdened when considering lowering the policy rate.

However, the impact is expected to be short-term. Na said, "If the shutdown prolongs and weakens expectations for a rate cut at the October Federal Open Market Committee (FOMC) meeting, a short-term market correction would be unavoidable," but added, "Ultimately, given the high likelihood that the Fed will enter a rate-cutting cycle, the longer-term upward trend in stock prices will continue."

Han Kyung-woo, Hankyung.com reporter case@hankyung.com