This month, the South Korean stock market, which had been rising rapidly, entered a consolidation week (Feb. 17-21). As the KOSPI index surpassed 2,650 points, the demand for profit-taking increased. This comes as the U.S. administration mentioned the possibility of budget cuts, and concerns about tariffs resurfaced, providing a justification for the correction.
The KOSPI index secured above 2,670 points after rising for seven consecutive trading days until the 19th. The KOSDAQ index also briefly touched 780 points. On the 20th, concerns over tariffs raised by U.S. President Donald Trump led to short-term profit-taking trades, causing both the KOSPI and KOSDAQ indices to decline slightly. However, on the 21st, they rebounded, with the KOSPI closing at 2,654 points and the KOSDAQ at 774 points.
Until early this year, the South Korean stock market was viewed as undervalued. However, as the stock market has risen recently, the valuation appeal has diminished.
In addition, U.S. President Donald Trump reintroduced tariff concerns, which dampened investment sentiment. Trump said last week, "Within the next month, I will announce tariffs on automobiles, semiconductors, pharmaceuticals, and lumber." He also hinted at the possibility of federal budget cuts. Industries that were considered beneficiaries of the Trump administration, such as defense and shipbuilding, have experienced corrections.
This week (Feb. 24-28), attention should be paid to NVIDIA's earnings announcement. NVIDIA's performance could impact stock prices of artificial intelligence (AI)-related and semiconductor stocks. NVIDIA plans to announce its Q4 fiscal year 2025 results (from November 2024 to January 2025) on the 26th (27th Korean time). The market forecasts an average earnings per share (EPS) estimate of $0.845, with expectations of reaching a new all-time high.
Lee Kyung-min, a researcher at DAISHIN SECURITIES, noted, "NVIDIA's performance, as a leading stock in AI, will be a critical turning point in assessing the sustainability of the AI investment momentum." He emphasized that it is crucial to determine whether the guidance meets market expectations. Confirmation is needed that the popularization of AI and cost efficiency lead to increased semiconductor demand.
Another researcher commented on NVIDIA's earnings announcement, saying, "In particular, the fact that revenue from Blackwell AI chips began to be reflected in performance since the fourth quarter of last year indicates that expectations for demand for the latest GPUs are expanding." They predicted that earnings exceeding expectations would be favorable for semiconductor stocks related to NVIDIA, such as SK hynix.
On the 25th, the Monetary Policy Committee of the Bank of Korea will decide on the benchmark interest rate. The securities industry expects the committee to lower the February benchmark rate by 25 basis points. Attention should be paid to the direction of future monetary policy decisions that the committee will announce after the rate decision.
On the 28th, the results of the U.S. Personal Consumption Expenditures (PCE) for February will be announced. Although the Consumer Price Index (CPI) and Producer Price Index (PPI) in January rebounded, a decline in the PCE is anticipated due to falling reflection items. The securities market predicts the February headline PCE will slow to 2.5%, down from January's 2.6%, and the core PCE will also slow to 2.6%, down from January's 2.8%.
This researcher explained, "If a slowdown in personal income and consumption is confirmed, normalizing the consensus for interest rate cuts is possible, but it could become a variable for short-term fluctuations due to discrepancies between actual figures and consensus estimates."
Experts advise that with the stock market entering a short-term overheating phase, it is advisable to develop investment strategies centered around neglected industries. News of the lifting of China's ban on the Korean Wave (한한령) has led to inflows of buying, particularly in the entertainment, media, and cosmetics sectors.
This researcher stated, "In a situation where sectoral rotation is evident, it is important to refrain from chasing after strong upward trends observed in shipbuilding, machinery, the internet, and pharmaceutical and biotechnology sectors, which experienced momentum. Instead, it is suggested to maintain a buying strategy during corrections, focusing on neglected sectors such as semiconductors, automobiles, and secondary batteries."
Na Jeong-hwan, a researcher at NH Investment & Securities, analyzed, "With the news of the lifting of China's ban on the Korean Wave, stocks related to media, entertainment, and cosmetics surged. After the stock prices rise due to such favorable news, a selection process will likely ensue, focusing on sectors and stocks supported by performance."