●Thinking about the market – August 2nd

The three-day U.S. market data was released as the best results. The PPI/CPI index reaffirmed price stability, while the retail sales index dampened recession fears and created a Goldilocks environment for the stock market’s favorite.

The market’s decline started with the July 11 CPI announcement, which increased volatility through interest rates and exchange rates, viewpoints on the recession, and earnings reports by industry and companies. The market’s rebound was expected to be primarily as supply and demand issues were resolved, with that spot being around 50% of the decline since July 11.
KOSPI 2,641.7p, KOSDAQ 767.6p, S&P500 5,394.5p, NASDAQ 17,189.8p

The KOSPI is still a little bit below the 50% mark. The S&P 500 was ahead of the 50% mark, while the Nasdaq Composite was out today. That’s because the tech sector is the biggest drop in the correction. The KOSPI and NASDAQ are connected by AI to big tech and semiconductors. We expect our semiconductor sector to be boosted as the tech sector’s upward strength will increase from the time when the NASDAQ exceeds 50%.

Now, the attention of market participants will lead to the Democratic National Convention on Aug. 19-22, the Fed Jackson Hole meeting on Aug. 22-24, and the Nvidia earnings release on Aug. 28.

Over the next two weeks, we expect KOSPI to try to recover to the 61.8% spot, while KOSDAQ and NASDAQ will try to recover to the 70.5% spot. The first rebound was the resolution of supply-demand issues, and the second rebound was the easing of recession concerns.
KOSPI 2,701.8p, NASDAQ 17,539.4~17,797.1p

With recession concerns easing, the market’s rebound is expected to be a different trend from that of the past month. U.S. stocks expect a strong tech sector, a rebound in Tesla and small- and medium-sized consumer and industrial goods. For domestic stocks, the semiconductor and IT HW sectors fell due to recession concerns and macro-indices’ recession, while the bio, shipbuilding and defense sectors rose. We expect the semiconductor and IT HW sectors to rebound over the next two weeks, plus more interest in the renewable sector. In the case of cosmetic colorors that reflect recession concerns late after the recent earnings season, we expect a few stocks to provide an opportunity for a rebound.

In the previous post, I shared all the stocks that were surprising in the Q2 earnings call. There were surprises in various sectors and expectations for Q3 earnings are alive. I’ll share what I felt through the earnings call.

First, the semiconductor sector performed better than expected by small managers. Equipment owners in the post-process packaging sector performed well, cleaning/coating companies (Wonik QnC, Comico, Hansol IONS) all performed well in the entire process, and aftermarket Si company Waldex performed well. This suggests that legacy semiconductor small managers’ performance will improve even more from the third quarter.

At some point toward the end of the year, Samsung Electronics’ CAPEX plan will be announced in detail. The core of this CAPEX will be 1c nano in DRAM and V10 in NAND, except for HBM, and the benefits are expected for newly adopted equipment. In particular, it is expected that domestic companies that supply main equipment to main lines will be born in this CAPEX cycle, so these companies will be the leaders of the next semiconductor cycle.

Some people think of recent renewable energy as Harris trading, but I have a different personal opinion. A week ago, I posted something about wind power. Renewable is a sector that is particularly interest rate sensitive. Stocks have been weak since 2022 until recently, the main reason being that they were rising interest rates. In addition, there was an issue of project delays due to supply bottlenecks. In the case of solar power, there was also an overstock issue. Now, as we enter a downward trend in interest rates, we have a turnaround time for business.

In wind power, CSWind showed it first. Even Dongkuk S&C recorded a surprise, showing the wind sector’s first turn in business in renewable energy. Now a two- to three-year upcycle has begun. In solar power, HD Hyundai Energy Solution hits a surprise, pushing its stock price to the upper limit. In July’s export data, solar modules show that exports to the U.S. are resuming after a long tunnel, and prices are also rebounding. In this situation, Hanwha Solution is also expected to turn into a surplus from the third quarter after the long tunnel. It is time to expand interest in renewable energy.

We judge that the most important technology trend issue in 2025 is On-device AI. Current AI innovation is comparable to the past Internet innovation. Initially, after investing in B2B-centered infrastructure, enterprise-type services are carried out, and services are gradually expanded to B2C. The so-called catharsis is needed to move from B2B to B2C, and in this period, disappointment can cause the stock price to drop. Eventually, the bubble will occur in B2C, and the AI cycle can start again as 2025 is the first year of On-device AI. From now on, this will be the area where the study should be focused, and the second half of 2024 is expected to cover the leadership in the manufacturing process and technological changes to expand B2C devices.

The full-scale distribution of On-device AI to B2C in 2025 means trends in the electric vehicle, autonomous driving, and robot sectors. Batteries will have new opportunities starting in the first half of 2025, and companies related to fire and charging, which are important technology areas for the expansion and distribution of electric vehicles, can be the new leaders.

We will explain the progress of the stock market in 2024 and the main ideas of the upcoming stock market in 2025 at the customer seminar on August 30th. We prepared to take a break from outside activities after May to strengthen our inner room, but I think it’s time to come back to the public.