US July CPI Meets Expectations, Boosting Rate Hold Bets — KOSPI Surges 4% to Reclaim 6,850

The KOSPI rallied more than 4% on the day, holding in the 6,849-6,850 range, with the gain briefly widening to 4.8% intraday as the index passed 6,875. The KOSDAQ shook off early-session wobbles to settle into a roughly 1% gain, extending a rally that has continued since late July with only a single day of pullback. On the exchange, foreigners logged net buying for a third straight session, with intraday buying at one point reaching roughly 1.9 trillion won, led most heavily by SK Hynix, Samsung Electronics, Naver, APR, and Hanwha Aerospace, in that order. The won held stable around 1,415 per dollar.

The domestic volatility index (a VIX-style gauge) fell about 2% to 55, marking a seventh consecutive day of decline. Hosts flagged the simultaneous rise in stock prices and fall in volatility as the most notable market signal, and suggested volatility could fall further from the mid-50s toward the 40s. A shrinking volatility index means lower risk for investors, which was read as reinforcing the case for buying Korean equities at reduced valuations. A range of overseas reports were also said to share the view that Korean market volatility is near historic lows, leaving little entry-cost burden.

US markets rose the previous day on the back of the CPI print, with the Nasdaq and S&P 500 both gaining, and even the small-cap-heavy Russell 2000 advanced despite yields failing to fall. Semiconductor and memory-related names stood out in particular: SK Hynix ADRs closed up roughly 9%, AI data-center play Super Micro Computer surged more than 19%, and so-called "neocloud" names such as CoreWeave and Nebius jumped by as much as 30%-plus on strong earnings. That tailwind was said to have crossed the Pacific, driving the Samsung Electronics- and SK Hynix-led rally in the Korean market on the day.

Morgan Stanley swapped its top pick from Samsung Electronics to Samsung Electro-Mechanics, maintaining an Overweight rating and raising its target price from 2.56 million won to 2.62 million won. The bank cited a stronger likelihood of firming MLCC (multilayer ceramic capacitor) prices along with improving demand for high-end substrates such as semiconductor packages. On the news, Samsung Electro-Mechanics shares jumped 12-15% on the day, reclaiming the 1.5 million won level.

Separately, news that Situational Awareness, a hedge fund founded by ex-OpenAI researcher Leopold Aschenbrenner, has increased its stake in Japanese MLCC maker Taiyo Yuden also lifted MLCC-related names. The fund has invested broadly across the AI supply chain but at one point faced a liquidation crisis due to excessive leverage, surviving after a substantial portion of its holdings passed to hedge fund Citadel. A recent filing confirming that Citadel has further increased its investment in the Japanese substrate maker was read as a sign that a major, well-informed fund remains bullish on the MLCC industry. Hosts cautioned, however, that newly formed hedge funds tend to rotate positions quickly, so following such news into a trade warrants care.

On the Samsung Electronics/Samsung Electro-Mechanics glass substrate business, some Chinese media reported that mass production has been delayed after the technology failed a reliability assessment. Still, glass-substrate-related stocks rose in tandem on the day, suggesting the report's credibility needs further confirmation. On fundamentals, Samsung Electro-Mechanics' operating margin remains solid at above 10%, an indication that there is nothing wrong at the fundamental level.

Reports emerged that Singapore's sovereign wealth fund Temasek is moving to acquire stakes in Samsung Electronics and SK Hynix. As one of the largest sovereign wealth funds globally by assets and known primarily for long-term, direct equity investments, the move was interpreted as a bet on the long-term growth of both companies. Hosts noted Temasek's characteristic conviction — rarely selling a position even amid a share-price decline — attributing this to an organizational culture where fund manager turnover is rare.

While the size of the investment has yet to be finalized, reports of contact with relevant government ministries suggested substantial investment intent. Temasek's AI-related exposure currently accounts for roughly 5-6% of its overseas equity portfolio, and reports indicate a plan to roughly triple that to 15%. If Samsung Electronics and SK Hynix are included within that expanded allocation, the calculation suggests a sizable inflow of fresh capital could follow. The development was viewed as a significant positive for market flows, marking the entry of major foreign capital that had not previously been invested in the Korean market.

Amid a renewed rally in gold prices, now trading around $4,466 per ounce, reports emerged that the Bank of Korea purchased roughly 35 billion won worth of overseas-listed gold ETFs. As a purchase of a financial product tracking gold rather than physical gold itself, the move marks the central bank's first return to gold-related investment in 13 years. Unlike central banks worldwide that have been increasing gold holdings amid geopolitical risk and de-dollarization trends, the Bank of Korea had remained passive, having previously faced political criticism over the timing of past gold purchases.

The Bank of Korea is reportedly pursuing two tracks simultaneously: one is the overseas-listed gold ETF purchases already under way, and the other is physical gold purchases, currently in the preparatory stage. Physical gold purchases are said to be under consideration through the domestic market rather than international markets, with coordination reportedly under way with domestic gold distribution, processing, and export firms to secure a portion of export-bound volume while minimizing impact on domestic gold prices. Hosts viewed the central bank's move toward holding a more diverse range of assets and acting more proactively as a positive shift away from the overly conservative policy stance it had maintained out of concern over criticism.

Concerns over power shortages driven by AI data-center expansion resurfaced, lifting energy storage system (ESS) and solid oxide fuel cell (SOFC) stocks tied to onsite power generation. On the prior day's earnings call, Nebius said it could not fully meet demand due to a shortage of data centers, reviving interest in the concept of "onsite power generation" — building power plants directly alongside data centers. News of a partnership with US-listed Bloom Energy also lifted shares of related domestic suppliers.

While the power-shortage issue itself is not new, the theme drew renewed market attention after actual earnings results reconfirmed the data-center shortage. Optimistic views on the memory and AI industry outlook shared broadly across the sector following last week's US memory and storage industry event were also cited as contributing to the improved mood.

US July consumer price data came in exactly in line with market expectations across all four readings: headline up 3.4% year-on-year and 0.1% month-on-month, and core up 2.5% year-on-year and 0.2% month-on-month. With year-on-year deceleration extending for a second straight month following May and June, the report was read as a signal that inflationary pressure is being contained. By category, computer peripherals rose the most on higher memory prices, while energy fell 1.5%, with analysts attributing the gap between headline and core ultimately to energy. The supercore index, which strips out food, housing and energy altogether, rose just 1.9% year-on-year, suggesting services inflation pressure remains modest.

Hosts noted that both pillars driving the rate decision — employment and inflation — have eased concerns. Last week's July jobs report came in at negative 20,000, far below the market estimate of 83,000, missing on both sides of expectations by roughly 100,000 and dispelling worries of an overheating economy. With this CPI print also matching expectations, the case for a rate hike failed to materialize decisively, and the reading was interpreted as the last piece removing a major obstacle for the market in August-September. Still, some caution was raised that inflation is trending back up on a month-on-month basis and that with energy variables still in play, the next CPI reading could face renewed pressure depending on developments in the Middle East.

The odds of a rate hold were also confirmed numerically. The probability of a hold at the October 28 meeting rose to 45%, while the probability of a hold at the September meeting climbed to 60%, moving past a majority. Still, the fact that US 10-year Treasury yields remain above 4.6% and 20-30 year yields above 5.2%, without falling quickly, was read as reflecting market skepticism that oil prices have come down enough. Reports on the Middle East, including Pakistan, remained mixed, leaving uncertainty over a ceasefire unresolved.

Separately, news emerged that the US July fiscal deficit hit its widest level in five years. The cumulative fiscal-year deficit stood at $1.799 trillion, up from $1.629 trillion a year earlier. With inflationary pressure and fiscal deficit pressure coexisting, the environment was described as one where raising or cutting rates is equally difficult, and this — a condition that effectively rules out rate hikes for the time being — was seen as underpinning the market's hold expectations. As for the Producer Price Index (PPI) due out the next day, there is a chance it could come in higher than expected due to rising semiconductor prices such as DRAM, but this was not expected to weigh heavily on the market.

Today's Noon Salon featured senior correspondent Byun Sang-wook, who diagnosed structural problems in Korean economic news coverage. He noted that while roughly 7,000 media outlets exist in Korea, only about 50-60 are able to register actual reporting and articles on portal sites, and of those, only 20-30 conduct independent reporting with genuine editorial conviction. Among even those 20-30, a significant number are owned by construction capital or private equity funds, meaning that most of the economic information circulating in the market ultimately falls under the influence of capital. He identified the IMF foreign exchange crisis and the 2008 financial crisis as the decisive turning points when the press became fully subordinated to capital, and expressed concern that the recent JoongAng Ilbo/JTBC affair signals a further deepening of profit-driven media management.

As a concrete example of economic news distortion, Byun cited coverage of the "excess tax revenue" controversy. After Bloomberg first reported it under the headline "excess profit," domestic media outlets poured out 121 articles over three days, escalating it into a political attack targeting the presidential office's chief economic secretary, which the ruling party then cited in turn, consuming it as a political frame in a vicious cycle. He pointed out that on the same KOSPI plunge, different outlets overlaid different political interpretations — failure to defend the exchange rate, negligence on single-stock leverage, the government's "socialist" intervention — and noted that, unlike political articles, readers tend to take economic articles at face value as "numbers and facts," making the risk of distortion greater.

He categorized several types of distortion in economic reporting. The first is numerical distortion — for example, comparing Korea's quarter-on-quarter growth rate directly with the US's annualized growth rate, or citing only the highest and lowest real-estate transaction prices without an average to exaggerate price swings. The second is overreliance on anonymous sources, where reporters' frequent job rotations lead to a lack of expertise and time pressure, producing a flood of "according to sources" reporting. The third is the practice of attaching anonymous bylines such as "Online News Team" or "Editorial Desk," rather than a reporter's name, to promotional articles to obscure accountability. He also noted that headlines for major articles are typically decided not by the reporter but by editorial desk heads, who, in seeking promotion, often gauge the intentions of management and owners, frequently resulting in sensationalized, distorted headlines. He specifically flagged Maeil Business Newspaper and the Korea Economic Daily as requiring particular scrutiny given their ownership structure, in which large conglomerates affiliated with the Federation of Korean Industries hold stakes.

Byun stressed that obtaining good information requires not only reading analyst reports and disclosure filings but also learning to read articles themselves with an awareness of how they get distorted. As an alternative, he proposed that like-minded media outlets and YouTube channels form consortiums or networks to jointly produce reliable economic information, and stated his intention to continue serving in an advisory role for a forthcoming project aimed at building a progressive economic media outlet.

Commentary raised concerns over the unusually large profits Korean brokerages have posted recently. Given that most of these profits stem from trading fees on single-stock leveraged ETFs, the point was made that this money has effectively been transferred from investors and the public, leaving unresolved the question of how brokerages will fulfill their social responsibility, including shareholder returns. Leveraged trading fees alone were estimated at roughly 90 billion won, while cumulative retail investor losses over the same period were estimated at roughly 56 trillion won. With the public bearing losses from the market decline while brokerages continued collecting fee income throughout that same decline, the commentary called for greater scrutiny of accountability.

The gap in management fees among asset managers running leveraged ETFs also drew criticism. Samsung Asset Management and Hanwha Asset Management charge the highest management fee at 0.269%, more than three times the 0.07-0.08% range charged by Mirae Asset, Shinhan, Korea Investment, and Kiwoom, among others. In terms of management revenue, Samsung Asset Management earned 3.2 billion won and Mirae Asset earned 500 million won, while most other managers earned only around 100 million won, meaning Samsung Asset Management alone captured 82% of total industry management revenue. The commentary called for reflection on a structure in which the manager with the greatest market dominance and influence collects the most fees while losses are passed on to investors.

The commentary further argued that because the financial and securities industries are licensed businesses that draw on social infrastructure and public trust, they are called on to serve a role beyond simple profit-seeking. Specific suggestions included, first, expanding investment in research centers to produce quality information, and second, providing analysis commensurate with interest income earned on loans such as securities-backed lending — for example, ensuring at least minimal research coverage is in place when extending KOSDAQ-backed loans.