The repeatedly raised controversy over an "artificial intelligence (AI) overvaluation" is expected to act as a major risk factor for global stock markets this week (Nov. 24–28). Attention will also remain on the U.S. Central Bank Federal Reserve (Fed) decision on interest rates in December. Remarks by Fed Commissioners and U.S. inflation and employment conditions could become wild cards for the market.
On the 17th–21st, Korea's stock market moved like a roller coaster. The KOSPI index, which started at 4,170.63 points on the 14th, swung up and down and fell more than 300 points to 3,853.15 points on the 21st. The KOSDAQ index plunged 3.8% during this period.
Although the strong results announced by Nvidia early on the 20th seemed to warm up domestic semiconductor stocks, the situation changed in just a day. The subsequently released U.S. September jobless rate rose to 4.4% from 4.3% the previous month, stoking concerns about the labor market, and a remark by Fed Governor Lisa Cook that there was "the impression that the likelihood of overvalued asset prices falling has increased" dampened expectations for a December rate cut.
A short-term correction in the market could continue this week. That is because there is a lack of official data to assess the U.S. economy. First, the release of the October Consumer Price Index (CPI), a key indicator needed to decide whether to cut the benchmark rate at the December Federal Open Market Committee (FOMC), is uncertain. On-site surveys could not be conducted due to the U.S. federal government shutdown. The October employment report is also not expected to be released.
Of course, there are some indicators from which to glean hints. There is the September Producer Price Index (PPI) to be released by the U.S. Bureau of Labor Statistics on the 25th and the September export-import price index due on Dec. 3. In the early hours of the 27th, the Fed's Beige Book, its economic assessment report, will be released.
Lee Kyung-min, a researcher at Daishin Securities Co., said, "As economic indicators are omitted or delayed, the Beige Book's importance has grown," and added, "With a December hold becoming the dominant view, currency policy uncertainty appears to be getting priced in." Lee said, "Before entering the 'blackout' period that restrains remarks ahead of the FOMC meeting on the 29th, a consensus (market agreement) on currency policy will be formed through remarks by Fed Commissioners."
NH Investment & Securities predicted the KOSPI index will move between 3,800 and 4,200 points this week. It picked semiconductors, nuclear power, securities, holding companies, artificial intelligence (AI) software, and automobiles as sectors of interest.
It maintained its buy view on AI Semiconductor-related stocks. Na Jeong-hwan, a researcher at NH Investment & Securities, said, "Uncertainty over a Fed rate cut will remain in the short term," and added, "As the cycle of AI bubble controversies and resolutions repeats, a trend that actually suppresses a collapse is forming, so the buy view on the AI infrastructure industry remains valid."
Advice also emerged to take advantage of heightened volatility. Researcher Lee Kyung-min said, "Among leading stocks with higher earnings contributions, many sectors have become more attractive in valuation," and added, "Semiconductors, defense, holding companies, displays, software, utilities, steel, retail and distribution, and hotels and leisure have become more appealing relative to their undervaluation, so we propose an 'overweight' strategy."