Semiconductor Strength Pushes KOSPI Back Above 7,000 Despite Middle East Oil Spike; Yen Strength and Carry-Trade Unwind Remain a Watch Point

KOSPI Retakes 7,000 as Semiconductors, Nuclear Power, and Shipbuilding Rally Together The KOSPI rose as much as 1.9% intraday, passing the 7,830 level, while the KOSDAQ gained about 1.7% to trade around 825. Foreign investors alternated between buying and selling in the KOSPI market during the session, while posting net buying of nearly 180 billion won in the KOSDAQ; in the futures market, foreign buying extended to a fifth straight session, supporting the index's attempt to break above 7,000. Gains narrowed later in the session, with the KOSPI heading toward a close up about 0.9% and the KOSDAQ up about 1.3%. Foreigners turned to modest net selling on the exchange, and Samsung Electronics stayed near flat while SK Hynix held on to a gain of about 2.8%. Advancing and declining issues on the KOSPI were roughly balanced at about 430 each, but strength in large-cap names by market capitalization drove the index higher. The previous session had seen a sharp intraday drop after news broke of a Houthi attack on a Saudi refinery. Oil prices surged in the latter part of Asian trading, dragging down the local market as well, but this session saw broad gains across semiconductors, power, nuclear power, and shipbuilding that offset the earlier decline. The three major New York indices closed lower on the back of the oil price spike, but the Philadelphia Semiconductor Index rose more than 1%. News of a large-scale AI infrastructure deal between Qualcomm and Amazon lifted the semiconductor sector broadly, a tailwind that carried over to local semiconductor stocks. Houthi Attack on Saudi Refinery Fuels Oil Price Surge and Fears of Wider Middle East Conflict International oil prices surged after reports that Yemen's Houthi rebels attacked an Aramco refinery in southern Saudi Arabia. WTI rose about 1.5% from the prior session to $94.47, while Brent climbed more than 1% to around $99.5, nearing the $100 mark. The hosts noted that the significance of this development is considerable given that Saudi Arabia, the world's largest oil producer, was the target. The attack was interpreted as part of an involvement strategy that draws surrounding Middle Eastern countries that had until now stayed out of the conflict, separate from the direct clash between Iran and the United States. Amid exchanges of attacks between the US and Iran around the Strait of Hormuz, concerns grew that the situation could spiral out of control if the conflict spreads to the area near the Bab-el-Mandeb Strait, the alternate route on the opposite side. The Wall Street Journal reported exclusively that Iran carried out a second attack on a US naval vessel, and over the weekend the US struck an Iranian oil tanker, suggesting that mutual targeting of tankers and refineries by both sides continues. Deaths were reported at 500 and displaced persons exceeded 20,000, while Iran released footage testing a new missile with extended range and improved precision. According to domestic Iranian reports, Iran is demanding $300 billion in reparations, full removal of sanctions, the return of $100 billion in frozen assets, and the lifting of the naval blockade as conditions for a peace deal with the US, suggesting that reaching an agreement will not be easy. US Treasury yields, however, showed little reaction to the oil price surge. The 10-year held around 4.8%, and the 20-year and 30-year saw only minor moves near 5.26%, an interpretation read as evidence that the market is treating this Middle East episode as falling within a more predictable range than in the past. Still, concerns were raised that if oil prices stay above $100 for an extended period, the combination of surging winter heating demand and Europe's shortfall in gas stockpiles (currently around 60% versus a normal 85%) could add further upward pressure on prices. Global Oil Prices Surge, WTI and Brent Both Rise — Following the attack on Saudi oil refineries, WTI reached $94.47 while Brent climbed to $99.5, with Brent posting the higher level. Yen Strength Lifts the Won in Tandem; Carry-Trade Unwind Concerns Persist The exchange rate fell for a second straight day, with the won-dollar rate dropping to 1,339 won. This reflected the yen-dollar rate stabilizing around 153 yen, with yen strength weakening the dollar, which in turn fed through to won strength. Behind this lies Japan's largest-ever foreign exchange market intervention. In August, Japan deployed $98.6 billion to defend the yen, and in the process is confirmed to have sold US Treasuries it held, with Bloomberg reporting that Japan's holdings of foreign securities fell below $1 trillion. The structure that has sustained the yen carry trade — Japan keeping rates low while defending yen weakness through Treasury sales — is now facing a shift, as the market is pricing in a 98%, effectively near-certain, probability of a Bank of Japan rate hike this month. A rate hike could trigger a carry-trade unwind as yen funds flow back to Japan, raising concerns of selling pressure on risk assets worldwide; however, many in the brokerage industry believe that, having learned from 2024, the market is already prepared and unlikely to see a shock on the scale of the past. The variable to watch is Treasury Secretary Bessent's bond purchases. The Treasury Department has decided to buy back a portion of the oversupplied Treasuries in the market to curb a sharp rise in yields, with purchases set to begin from September 9 starting tonight. The market expects purchases in the range of $5-6 billion, while Bessent mentioned at least $4 billion, noting that the Treasury account holds about $1 trillion, and stressed that this is not quantitative easing. Bessent also issued a warning to traders betting on yen weakness, saying 'I am the house now,' asserting that market control rests with him. The hosts, however, noted that such remarks could be an exaggerated show of bravado, assessing it as an attempt to manage the situation through rhetoric rather than actual firepower to instill market confidence. Ultimately, as long as the US keeps a close eye on Treasuries, Japan will have little choice but to accelerate the pace of rate hikes, and there was discussion that the typical six-month interval between hikes could narrow to three months, raising the possibility of another hike within the year. [Kwangsoo's Take] The Dilemma of Weakening US Leadership and a Protracted Middle East Conflict Lee Kwang-soo argued that the current pattern of Middle East escalation stems fundamentally from a weakening of US leadership. Leadership is sustained by championing justice, but as US foreign policy has increasingly shifted toward calculations of gains and losses, it has become unable to lead with justice at the forefront, and as a result other countries have begun openly pursuing their own interests as well. He offered a cautious outlook that, even with the US government's various efforts — including Treasury purchases and pressure on China — if inflation and interest rate concerns are not resolved, the situation could ultimately revert back to a war footing. He was careful to note, however, that this remains a hopeful projection rather than a firm prediction. On oil prices, he noted that the move from $70 to $100 already represents an increase of nearly 40%, making it unlikely that a rise of the same magnitude would follow from the $100 level. He reasoned that once the market begins to treat higher oil prices as a given, tolerance for volatility could actually increase, allowing investors to respond more calmly. AI Hardware Back in Focus as Qualcomm-Amazon Mega-Deal Shifts the Landscape from Software Qualcomm signed a data center infrastructure deal with Amazon worth up to $60 billion. The agreement supports AI infrastructure buildout across multiple generations, and Amazon offered Qualcomm warrants worth $4 billion to underpin trust in the partnership. The news lifted custom chip-related stocks including Qualcomm and Broadcom, with the effect spilling over into local semiconductor stocks as well. Market attention has shifted from software back to hardware over the past several days. As ChatGPT's new model, Astra, was assessed as a general-purpose AI model that integrates multiple functions into a single model, concerns grew that individual software products could be absorbed into one massive model, weighing on the software sector. In contrast, the fact that running this model currently requires about 100,000 GPUs, potentially rising to as many as 400,000 in the future, drew attention and revived expectations for hardware demand. Views that competitors such as Anthropic, Meta, and Google will require infrastructure of a similar scale reinforced this trend. At a Citi conference, AMD projected the AI market would expand to $2 trillion by 2030 and that data center revenue would more than double from current levels by 2027. Intel surged more than 10% intraday on news that it plans an approximately 10% additional price increase in early October to match rising CPU demand, and its share price has climbed from the $20s to the $100s over the past year amid US government investment and a change in CEO. Domestically, strength in semiconductor equipment and materials stocks stood out. Jusung Engineering rose more than 5%, joined by gains in Wonik IPS, EO Technics, Leeno Industrial, Simmtech, HPSP, DB Hitek, and Isu Petasys. This was attributed to a string of recent reports on semiconductor equipment and materials names from brokerages including Shinhan, Daishin, and KB. Apple's new product launch event is scheduled for tonight. Key points of interest include whether the new devices will feature foldable technology comparable to Samsung's, the launch pricing, and the specifications of the built-in chipset, with Counterpoint Research noting that demand could actually decline if the new models show little change from prior versions. Korea-US Nuclear Power Talks Hinge on Westinghouse Stake and Technology Usage Rights Of the funds pledged under the Korea-US investment agreement, 60% is expected to be directed toward nuclear power, with the final agreement reportedly specifying construction of 8 reactors and a signing possible as early as September 18. Both the AP1000 and APR1400 reactor models are under review, with whether the Korean-model reactor is actually adopted cited as the key variable determining the scale of benefit to related stocks. When the US previously transferred nuclear technology to Korea, it retained an intellectual property clause requiring US approval for overseas exports, but Korea, after roughly 50 years of independent development, now asserts its nuclear technology as proprietary. This clause has repeatedly caused the US to block Korean export negotiations with European countries such as the Czech Republic and Poland, and in the current talks a compromise is being sought through specific terms such as royalty payments and work allocation. From Korea's standpoint, securing a stake in Westinghouse along with technology usage rights sufficient to allow management participation was cited as a key objective. This would let Korea build a track record for its reactor model in the US market and resolve the contractual constraints that have hampered its access to global markets. JPMorgan assessed that a deal is likely given the alignment of interests between the two countries, while noting that the timing of an agreement remains uncertain. During the discussions, Park Si-dong floated the idea of purchasing US Treasuries as an alternative to troop deployment. The comment suggested that, given Korea's relatively low ratio of US Treasury holdings to GDP, expanding Treasury purchases could serve as a way to gain diplomatic leverage while also securing a stable return. Nuclear Power Stocks Rally; KRX Semiconductor Index Rebalancing a Key Variable News that Holtec, Hyundai Engineering & Construction's US nuclear partner, is pursuing an initial public offering (IPO) lifted related construction stocks. Holtec has filed for listing targeting a valuation of up to $10 billion, and is reportedly undergoing an environmental review related to restarting closed nuclear plants in the US at the same time. Alteogen stayed near flat after news of a failed clinical trial with Novartis. Growing concerns over the program's continuation weighed on the stock's recent uptrend. The upcoming rebalancing of the KRX Semiconductor Index following this Thursday's quadruple witching day was also flagged as a supply-and-demand variable. With a 20% cap on per-stock weighting, and both Samsung Electronics and SK Hynix currently exceeding that cap, mechanical selling of these stocks is expected around the September 10 close, taking effect from September 11. It was noted that this flow could shift toward other semiconductor equipment and materials stocks. Given the difficulty investors face in tracking individual equipment and materials stocks one by one, it was suggested that referencing the constituent weightings of TIGER Semiconductor TOP10, the largest semiconductor ETF by market cap (in order: Samsung Electronics, SK Hynix, SK Square, Hanmi Semiconductor, Jusung Engineering, Isu Petasys, Wonik IPS, EO Technics, DB Hitek, Leeno Industrial), could help gauge broader sector interest.