KOSPI Breaks Above 7,100 as Foreign Buying Extends to Fourth Session, Semiconductor Rally Accelerates

This Week's Market Calendar in Full — CPI is the Biggest Variable This Tuesday brings South Korea's second-quarter GDP and Japan's GDP, while Wednesday sees South Korea's August unemployment rate alongside the U.S. Treasury's first-ever long-bond buyback. On the same day in U.S. local time, Apple's unveiling of its new foldable iPhone is scheduled, drawing attention to related stocks. Thursday is options expiration day and also brings the U.S. August Producer Price Index (PPI), alongside TSMC's August sales figures and earnings from Oracle and Adobe. Friday brings South Korea's early-September export data along with the U.S. August Consumer Price Index (CPI), which is singled out as this week's biggest event since it feeds directly into the Federal Reserve's rate decision scheduled for next week. Panelists noted that Friday's CPI release timing — after the Korean market closes but before the U.S. market opens — works in Korea's favor. If the CPI print is favorable, Korean equities could be the first to react when trading resumes Monday. There was debate over how to interpret employment data. Despite recent employment surprises, the probability of a rate cut stood at just 59%, well below the previous peak of around 70%, which analysts attributed to markets growing less trusting of employment data given its qualitative composition — growth concentrated in services such as leisure and hospitality, and a rising share of female employment. It was also noted that average hourly earnings rose just 3.1% year-over-year, below the inflation rate, meaning real wages have not actually increased. As a result, with Fed officials divided, this week's CPI was singled out as the key variable that could tip the policy balance, and panelists noted that unlike last year's broad bull market, the current range-bound market requires closely tracking such indicators. KOSPI Breaks Above 7,100 — Foreigners Net Buy for Fourth Straight Session The KOSPI rose more than 2% intraday to reach 7,166 points. This marks a recovery of roughly 33 trading sessions since the index fell below the 7,000 mark on July 23, with foreigners and institutions both net buying in the cash and futures markets for four consecutive sessions cited as the driver. Notably, in the prior session foreigners net bought more than 3 trillion won in the cash market alone while retail investors sold more than 8 trillion won, marking an unprecedented handover of shares. Panelists assessed that the KOSPI's recovery to 7,000 in about 40 days — after plunging from the 9,100 level in early June to as low as 5,500 — came faster than the market had expected. With this year's cumulative exports already surpassing last year's full-year total and South Korea being discussed as a potential fourth country worldwide, after the U.S., China, Germany, and Japan, to reach $1 trillion in exports, there was little concern over fundamentals. The key was the return of foreign fund flows, with the falling exchange rate cited as the central driver. The won-dollar exchange rate has fallen by more than 200 won in a sustained trend, highlighting the appeal of Korean assets, with the interpretation that capital is shifting toward Korea relative to a comparatively weak Japanese market (the Nikkei rose just 0.07%). With markets now pricing in a 99% probability of an ECB rate hike and a 98% probability of a Bank of Japan rate hike, a chain of yen strength, dollar weakness, and won strength has formed. However, retail overhang remains a burden. Estimates suggest cumulative net-bought retail positions across price bands could total as much as 170 trillion won, raising concerns that a rapid rise to the 7,500–8,000 range could trigger this overhang as selling pressure. That said, since retail investors have already offloaded a substantial portion of their holdings, one scenario suggested that once foreigners and institutions absorb this supply, the market could enter a supply vacuum that accelerates upside momentum. Among large-cap stocks, Samsung Electronics gained around 3% and SK Hynix rose 5–7%, with Doosan Enerbility (on nuclear and gas turbine expectations), construction stocks, and semiconductor equipment/materials names leading gains. On KOSDAQ, Jusung Engineering surged more than 10%. Iran-U.S. Tanker Clashes Intensify, Oil Prices Volatile Again In the Middle East, attacks targeting tankers between Iran and the U.S. have continued, with oil prices reportedly climbing above the recent high of $92 per barrel. The U.S. struck three Iranian vessels, which U.S. officials characterized as illicit crude exports via a 'shadow fleet,' while Iran had previously struck Saudi Aramco refining facilities, with both sides escalating mutual attacks on oil infrastructure and transport vessels. According to a New York Times report, U.S. intelligence believes Iranian hardliners have actually consolidated internal cohesion through the war, and hold the view that they only need to control the Strait of Hormuz until November, raising the possibility that the conflict could be prolonged. Goldman Sachs analyzed that if maritime shipping disruptions deepen, international oil prices could rebound to as high as $120 per barrel, and even if Middle East crude exports normalize, it expects the floor for oil prices to settle around $80, higher than the pre-war range of $60–65. It was also noted that the seasonal timing — the Northern Hemisphere entering its autumn and winter heating demand season — adds further upward pressure on oil prices. Panelists noted that oil prices and the war are matters of response rather than prediction, cautioning against both excessive optimism and excessive concern, while stating that from a long-term perspective — assuming the war eventually ends — there is no need for excessive contraction. Yen Strength and Yen Carry Unwind Concerns Behind Falling Won Behind the falling exchange rate lies Japan's foreign exchange intervention and yen strength. Japan reportedly deployed $98.6 billion to intervene in the FX market in August, and in the process sold U.S. Treasury holdings to fund the intervention, which was found to have temporarily spiked U.S. long-term rates as a side effect. A Bank of Japan rate hike has emerged as the fundamental solution. Japan has long been the epicenter of the 'yen carry trade' — borrowing cheap yen to invest in higher-yielding overseas assets — and concerns persist that a rate hike could trigger a 'yen carry unwind,' with that capital flowing back and creating selling pressure across global financial markets. Markets are currently pricing in an effectively 100% probability of a Bank of Japan rate hike this month, which is creating a chain of yen strength, dollar weakness, and won strength. Panelists cited this exchange rate dynamic, together with Korea's relative appeal versus Japan, as the reason foreign capital has recently been flowing into Korea rather than Japan. It was also suggested that because Japan's economy is structurally vulnerable to rate hikes (having adapted to prolonged low rates), the flow of Japanese capital into Korea could increase further in the second half compared to the first half. The Two Sides of a Falling Exchange Rate — Pressure on Cosmetics, Autos, Shipbuilding; Semiconductors Relatively Safe Won strength (a falling exchange rate) is positive for stabilizing import prices but weighs on exporters' earnings. In particular, the cosmetics and food sectors, which had recently stood out on strong exports, corrected in the prior session, and cosmetics stocks remained weak again today, reflecting the structural impact of reduced won-denominated revenue. Hyundai Motor also failed to show the momentum expected following its Investor Day, and both the automaker and shipbuilding sectors, which have high export exposure, were flagged as being in the negative impact zone from the falling exchange rate. Semiconductors, by contrast, are seen by most brokerages as relatively less affected by the exchange rate, since the pace of average selling price (ASP) increases is faster. That said, recent reports also noted the impact is not entirely absent, with semiconductor operating profit estimates being revised down by roughly 5% of revenue. Panelists advised against reacting to individual issues in isolation, and instead recommended judging based on the original investment thesis (such as export growth) and comparing which is more sustainable — exchange rate volatility or earnings growth. [Kwangsoo's Take] There Is No Such Thing as a 'Safe ETF' — The Covered Call Trap Responding to reports that retail investors unable to withstand volatile markets are flocking to 'safe ETFs,' Lee Kwang-soo pushed back firmly. He stated that products using the word 'safe' are largely marketing that sells on anxiety, and that there is no such thing as a safe investment in the world. He pointed out that the so-called safe ETFs mentioned in the report were, in most cases, either U.S. index-tracking ETFs or weekly covered call products. He detailed the problems with covered call structures in particular. A covered call sells away the upside from a stock's potential rise in exchange for a fee (premium), while the holder still bears the full downside if the stock falls. Meaningful returns only materialize when the index rises gently within a range; during a sharp rally the upside is capped, and during a sharp decline the risk is fully exposed. He compared it to buying real estate purely for the rental yield, only to have the property's price fall by more than the rental income received. Lee argued that because the term 'safe' can mislead consumers, financial authorities should regulate it strictly. Even if risk disclosures exist in the terms and conditions, he said the structure makes it difficult for ordinary investors to read and judge them, and called for the Financial Supervisory Service to regulate such terminology. He also noted that a major reason covered call products are sold so heavily is that they generate large fee income for distributors, stressing that investors need to understand that complex financial products, by nature, generate returns only under specific conditions. Outline Emerges for Eight Nuclear Reactors in U.S. Investment — Westinghouse Stake, Cost Risks Remain Exclusive reports that the U.S. has requested $120 billion of the total $350 billion in investment in the U.S. be allocated to building eight nuclear reactors sent nuclear and construction-related stocks surging. Orbitech hit its upper limit, KEPCO E&C rose more than 16%, Daewoo E&C gained 14%, and Hyundai E&C rose more than 6%. There was also talk that a framework could be signed and announced as early as September 18. Panelists noted that the U.S., which had long refrained from new nuclear investment due to radiation leak concerns, has shifted course amid surging power demand driven by data centers, and assessed that since South Korea (along with China) is effectively the only country in the world capable of building nuclear plants for the U.S., this development could be a major source of momentum for Korean companies. However, several risk factors were also flagged. Nuclear projects worldwide tend to see costs rise by more than three times the initial budget on average and completion delays of roughly three times the original schedule, raising the likelihood that total investment could exceed initial plans. It was also noted that under past agreements, Westinghouse holds a substantial share of intellectual property rights related to overseas nuclear exports, leaving the task of renegotiating those agreements or securing a stake in Westinghouse as part of this U.S. investment. It was also raised as a negotiation variable that the U.S. side is reportedly requesting 'project-by-project settlement' instead of the existing 'umbrella' method that consolidates profit and loss across projects. Panelists further noted that construction in the U.S. faces stringent labor regulations and costs that could surge amid the infrastructure investment boom including data centers, making cost management capability more important than order volume alone. They stressed that given South Korea is effectively an irreplaceable supplier, it should take a more assertive stance in negotiations. Construction and nuclear-related stocks surge on nuclear power expectations — News of the US nuclear power plant investment for 8 reactors lifted Kepco E&C over 16%, Daewoo E&C 14%, and Hyundai E&C over 6%, driving strength across nuclear and construction-related stocks. Gains Widen Into the Close — KOSPI Up 2.3%, KOSDAQ Also Rises Late in the session, the KOSPI extended its gains further, rising to 7,166 points and entering the close up 2.3%. The KOSDAQ also rose about 0.7% to pass 828 points. Foreigners continued net buying of roughly 240 billion won in the cash market and a modest 40 billion won on KOSDAQ, while institutions bought led by financial investment firms. Semiconductor strength stood out, with SK Hynix rising 5–7%, and it was noted that ahead of the following day's U.S. market open, sentiment toward the semiconductor sector remained favorable, with Micron up 3% and SK Hynix's ADR-equivalent premarket price up around 5%. On KOSDAQ, Alteogen saw a pullback, while secondary battery and semiconductor equipment/materials stocks remained strong, with Jusung Engineering extending its gain to more than 10%.