2024. 19.05 mins. U.S. closing

NASDAQ 15,775(-0.82%)
10-year U.S. Treasury interest rate 4.2841% (+1.00%)
Dollar Index 104.283p (+0.01%) NDF KRW 1,335 (-1)

PPI #Inflation #SuperMicrocomputer #Closed #LLY Report

The market was shocked once again after the CPI announcement, with producer prices (PPI) higher than expected in January. Major technology stocks fell, while U.S. bond rates rose. University of Michigan expected inflation for February also hit 3.0%, slightly higher than the 0.9% estimate, causing more anxiety in the market over inflation.

The U.S. stock market weakened ahead of the 19th, with anxiety driven by high prices, profit-taking driven by recent gains and the closure of the stock market. On the Nasdaq, most of the top market cap stocks, including the M7, fell. AstraZeneca rose 2.28%, while Eli Lilly (3.2%) and Novonodisk (+1.8%) were also strong in the S&P 500. Nasdaq and Philadelphia Semiconductor indexes fell more than Dow and S&P 500.
Coinbase rose more than 8% as it turned into a two-year surplus, while chip equipment maker Applied Materials (AMAT) rose 6% as it beat estimates. Nvidia, which is set to report earnings this week, closed flat. Supermicrocomputers (SMCI), the hottest stock in the AI market, recently plunged 20%.

In January, the PPI rose 0.3% month-on-month, and the core PPI, excluding food and energy, rose 0.6% to its highest level in a year since January last year. The hawkish comments from Fed officials also played a part in the rate hike. Atlanta Fed President Raphael Bostic insisted there was no rush to cut rates, adding that he expected two rate cuts this year. In the meantime, the bond market saw 10-year government bonds hit 4.3% intraday.

U.S. technology stocks have been adjusted, but except for some stocks, it seems to be a solid adjustment. As AMAT performance and guidance were better than expected, the U.S. stock market is expected to rebound on the 20th unless there is a major upset. The market may be bland today due to the U.S. closure, but we can expect a rebound in the bio sector in our market due to the opportunity to buy and the rise of the U.S. leading bio stocks. Thoughts on PBR1

The price of a stock is the capital value of the company
Therefore, in a sense, all companies are trading at a capital value of 1 on the market

If you say this, some companies don’t even have PBR1, and you’ll be wondering what they’re talking about
PBR is simply a ratio between price and book value
Even if the company’s capital is 100 billion won in accounting data, that’s because it’s recorded according to accounting rules
In fact, its value could be 10 billion or 100 billion

The capital value of a company should look not only at the book value of capital, but also at the rate of return it generates
It’s ROE

You can compare the expected return of investors to the company’s ROE to see how much of a premium it will give the book value

Let’s talk about an example
The current government bond interest rate is 4%
It is difficult to say how much the expected rate of return varies according to each person’s opinion
The expected rate of return changes every week depending on inflation and financial conditions.
Assumptively to explain the logic
Suppose a company about the size of Samsung Electronics has an expected return of 8%
then
I think the investor’s expected return on a typical company on KOSDAQ would be around 12%…

In this situation, if KOSDAQ company A’s ROE is 6%…
The company’s market capitalization will be discounted compared to Book Value
How much discount should I get?

Theoretically…
I don’t think half of the book value will come out
Then, such a company should not be listed on the KOSDAQ market
From a company manager’s point of view, too
This is true for stock market investors as well

Speaking of bonds
A company with an annual return of only 6% is like printing a 12% bond
The deadline is infinitely…
If it’s a short-term bond, it makes sense,
indefinitely
A 6% Annual Return Is This Crazy If A Company Gets 12% Bond

These companies must delist themselves or go out of business on the market
What’s important is that
When calculating the annual rate of return above
That’s not just the annual return on accounting books, but the annual return investors feel should be 12%
Therefore, even if the ROE in the accounting book is 12%, it will be discounted again if the shareholder return to the investor is not that much
After all, a company that does not meet the required return on the stock market must take action to achieve the required return somehow
also
Companies that are structurally unable to satisfy the required return on the stock market should not be listed on the stock market