Markets Hold Steady Ahead of Kevin Warsh's FOMC Debut

Cautious Trading Amid Sector Rotation

The KOSPI swung between gains and losses before closing up 0.04% around the 8,730 level, staying in a tight range. Foreign investors turned net sellers for the first time in four sessions, offloading roughly 1.2 trillion won worth of shares.

The KOSDAQ rose about 1.4% to 1,033 points on strength in biotech names, with institutions also flipping from selling to buying. The won weakened slightly to around 1,513 per dollar but remained broadly stable.

As Samsung Electronics and SK Hynix pulled back roughly 1.9% and 1.3% respectively, money flowed into biotech, shipbuilding, and defense stocks. Surveys from Goldman Sachs and Bank of America also pointed to easing concentration in AI names and growing interest in cyclical stocks.

Asian markets were broadly firm. Japan's Nikkei hit a fresh record high as uncertainty around the BOJ's decision cleared, while Taiwan's market recovered most of its intraday losses.

Samsung's Boston Dynamics Stake Talk and a Biotech Rally

Speculation is building that Samsung Electronics could acquire Hyundai Motor Group's stake in robotics maker Boston Dynamics. Expectations were fueled by SoftBank's looming Saturday deadline to exercise a call option on its 10% stake, with hopes that Samsung could be the buyer.

With Samsung Electronics expected to hold over 150 trillion won in cash by year-end, analysts argue it has strong incentive to deploy capital into higher-return stake acquisitions rather than new capacity investment. However, Chairman Chung Eui-sun's personal 23% stake in Boston Dynamics ties the deal to Hyundai's succession and governance restructuring, so the details still need confirmation.

Biotech was the hottest sector of the day. DND Pharmatec surged more than 20% on news of a joint next-generation peptide drug development deal with LG AI Research, while Olix, ABL Bio, and LNC Bio also posted double-digit gains on separate drug-related catalysts.

Other biotech names including Alteogen, Kolon TissueGene, and Voronoi rallied as well. Previously neglected domestic-demand and defensive names such as Samyang Foods also drew buying as the rotation broadened.

Persistent Chip Supply Tightness, Rising Defense and Shipbuilding Orders

Japan's Kioxia reclaimed the top spot by market capitalization on the Tokyo exchange. It drew attention by announcing capital spending over the next three years would stay about 10% below its 2022 peak, a cautious stance shaped by the price collapse that followed its last major capacity expansion.

Even as surging NAND prices are boosting earnings sharply, Kioxia's reluctance to expand output is being read as a signal that the memory supply crunch will persist. That's seen as good news for rivals Samsung Electronics and SK Hynix, who stand to benefit.

Morgan Stanley projects NAND prices could double by 2028, a scenario in which SanDisk and Western Digital's earnings per share could rise tenfold over three years. Reports also indicate Samsung Electronics, SK Hynix, Micron, and SanDisk are signing long-term supply agreements, a topic likely to dominate questions at the upcoming second-quarter earnings calls.

Defense and shipbuilding stocks also strengthened. Hanwha Ocean jumped more than 8% after a strategic partnership with Canada's Clean Power on a large LNG facility project, fueling hopes tied to a Canadian submarine order. Still, German media reports suggesting a domestic shipbuilder is favored for that contract warrant some caution against overoptimism.

Rising defense spending across NATO and Europe, combined with demand to replenish missile stockpiles depleted by the Middle East conflict, is driving a broader wave of defense orders. With exports now accounting for roughly half of domestic defense industry sales, LIG Nex1 partnered with Germany's Rheinmetall to pursue the European market, while Hanwha Aerospace increased its stake in Korea Aerospace Industries to become its second-largest shareholder.

Kevin Warsh's First FOMC Press Conference

The Fed's rate decision is due at 3 a.m. Korea time tomorrow, followed by new Chair Kevin Warsh's first press conference at 3:30 a.m. A hold is widely expected, but attention centers on his comments about the future rate path and whether balance sheet runoff will resume.

Though branded a hawk, Warsh is seen by some as closer to an advocate for shrinking the Fed's role altogether. Given his close political ties to the Trump administration and Treasury Secretary Bessent, his debut may lean toward emphasizing market autonomy rather than delivering a strong policy message.

Still, with mixed signals on whether persistent inflation and strong job gains are lasting trends, any visible disagreement among committee members could add to market uncertainty. Weakness in U.S. tech and chip stocks overnight was also read as pre-FOMC caution.

Sidong's Take: JoongAng Group's Mass Rehabilitation and Workout Filings

Five affiliates under JoongAng Group, including JTBC, simultaneously filed for corporate rehabilitation, while parent company JoongAng Ilbo is separately pursuing a workout. All six group affiliates now face liquidity strain at once, with financial-sector borrowings exceeding 1.3 trillion won.

The root cause is the structural decline in profitability of legacy broadcasters amid falling ad revenue, with an exclusive World Cup and Olympics broadcasting rights deal worth roughly 700 billion won — and weak resale of those rights — acting as the direct trigger. Successive credit rating downgrades on related bonds have also raised concerns about tightening in the credit market.

The fact that brokerage reports on the group's listed affiliate remained overwhelmingly bullish until recently points to complacency in Korea's credit-rating and research system that also deserves scrutiny. That said, when covering corporate defaults or rehabilitations, it's worth remembering that the livelihoods of employees and partner companies are at stake.