As tensions from the Middle East war eased and SK hynix posted record earnings, the KOSPI index surged from 6,200 to 6,500 in just a week last week. This week (Apr. 27–30), the U.S. Federal Open Market Committee (FOMC) is set to decide its benchmark interest rate, and major big tech earnings are scheduled.
Investors are focused on whether the KOSPI index's rally will continue this week. As the United States and Iran pursue talks without a cease-fire deadline, markets will watch how the U.S. FOMC and global corporations' earnings releases affect stocks.
Last week, the KOSPI index broke through 6,200, 6,300 and 6,400 points, then topped 6,500 intraday, showing strength. The KOSDAQ index also closed above 1,200 on the 24th for the first time in 25 years since the 2000 "dot-com bubble."
On the 29th this week (local time), the FOMC will decide the benchmark interest rate. With international oil prices rising after the Middle East war and inflation concerns mounting, experts expect rates to be kept on hold. Most major investment banks (IBs) forecast that the Federal Reserve (Fed) will resume rate cuts in September this year.
Although a rate hold is the consensus, it is important to see how Federal Reserve Board members perceive the current economy and inflation.
Ha Geon-hyeong, a researcher at Shinhan Investment & Securities, said, "While employment is recovering gradually, rising energy prices are increasing the expense burden," and added, "Pent-up consumer demand is reviving and keeping inflation pressures elevated, but the Fed is maintaining its stance of watching geopolitical risks, so the likelihood of holding rates at this meeting is high."
Also on the same day, major big tech earnings from Alphabet, Meta and Microsoft are scheduled. Guidance on artificial intelligence (AI) capital expenditures (CAPEX) is the most important indicator, as it affects related industries across semiconductors, power equipment and energy. Depending on the results, the share prices of the two leaders of the domestic market, Samsung Electronics and SK hynix, are also likely to be affected.
Kim Seong-hwan, a researcher at Shinhan Investment & Securities, said, "Looking at the recent U.S. market, stocks are reacting more to earnings from AI-related corporations than to U.S.–Iran cease-fire talks," adding, "As short covering to unwind short positions has piled in, even some speculative names have rallied together, while software names with weak earnings bases and economically sensitive stocks have shown heightened volatility."
In the securities industry, prospects for further KOSPI gains are positive, reflecting an improving semiconductor cycle. Goldman Sachs raised its 12-month KOSPI target to 8,000 from 7,000, reflecting upward earnings revisions driven by AI-related semiconductor demand.
However, the rapid short-term surge also brings risks. With both semiconductor leaders' results out and the KOSPI hitting a record high, profit-taking could trigger a pullback. While market sensitivity to war headlines has diminished, observers note the need to watch the potential for heightened volatility from external factors such as rising international oil prices.
Noh Dong-gil, a researcher at Shinhan Investment & Securities, said, "With first-quarter results for Samsung Electronics and SK hynix confirmed, in the short term it is worth seeking opportunities in non-semiconductor sectors where valuations are relatively less demanding," adding, "While semiconductors remain the center of the market, a strategy to find other sectors that can rise alongside them is also valid."
Although the impact of the U.S.–Iran war on our stock market has diminished, the Middle East situation remains an important variable.
U.S. President Donald Trump said he would sink without hesitation any vessel laying mines in the Strait of Hormuz. In response, Iran is refusing to join talks as long as the U.S. naval blockade continues. As tensions escalated, international oil prices again topped $90 per barrel.
However, there is still room for talks. With President Trump indicating a cease-fire extension, Iran also says it will negotiate if the United States lifts the naval blockade. The possibility of dialogue is holding even amid tensions.
Lee Kyung-min, a researcher at Daishin Securities, said, "Hopes for U.S.–Iran end-of-war talks were reflected in the recent stock rally, but as concerns emerged over the weekend that geopolitical risks could flare up again, caution is rising in tandem."