[R&E] KOSPI Closes with 75.6% Annual Gain, Semiconductors and Renewable Energy Remain Solid Amid Year-End Profit-Taking

R&E: Research & Epoch
This is News Epoch's signature report, which opens a new era of investment (Epoch) by analyzing securities firm research (Research).

Market Overview: Key Indicators and Trends

Ahead of the final trading day of 2025, the domestic stock market closed marginally lower, as the emergence of year-end profit-taking was offset by large-cap semiconductor stocks hitting new highs, which limited the decline. The KOSPI fell 0.15% from the previous day to 4,214.17 points, and the KOSDAQ closed down 0.76% at 925.47 points. Notably, the KOSPI achieved a remarkable feat by soaring 75.6% for the year, recording its highest annual growth rate since 2000.

Overnight, the U.S. stock market closed slightly lower as profit-taking emerged, particularly in technology stocks. The S&P 500 index fell 0.14%, and the NASDAQ Composite also dropped 0.24%. Amid thin year-end trading, widening differences of opinion regarding benchmark interest rate cuts in the December FOMC minutes weighed on the stock market. However, the energy, telecommunication, and entertainment/media sectors showed relatively solid performance.

The domestic bond market closed with rising yields, reflecting an increase in the KRW/USD exchange rate and foreign selling of Korea Treasury Bond futures amid sluggish year-end trading. The 3-year Treasury bond yield rose 1.3 bp to 2.952%, and the 10-year yield increased 3.0 bp to 3.385%. The KRW/USD exchange rate closed at 1,439.6 won, up 5.4 won from the previous day, driven by year-end bargain hunting and a strong dollar.

Core Industry Issues and Key Points

The semiconductor industry continued its solid trend as expectations of memory price increases and issues surrounding HBM and automotive semiconductors were highlighted. Samsung Electronics and SK hynix supported the index's downside by rising for 3 consecutive trading days. Micron rose 3.4%, and Intel also gained 1.3%. Forecasts indicated that the growing importance of etching equipment in advanced processes and benefits from memory layer stacking will continue. However, some tech stocks, including NVIDIA (-1.2%) and Lam Research (-1.2%), fell due to profit-taking.

Growth in the renewable energy and nuclear power sectors is prominent. The U.S. Energy Information Administration (EIA) projected that all net additions to new power generation capacity in 2025 will consist of renewable energy and BESS (Battery Energy Storage Systems), and this trend is expected to continue into 2026. China's Dongfang Electric (600875.CH), the leading company with a 40% market share in nuclear power plant equipment, is anticipated to benefit from large nuclear and hydropower projects as it leads in SMR (Small Modular Reactor) and nuclear fusion technologies. First Solar (FSLR.US) was selected as a beneficiary of the full-scale solar power demand from data centers in 2026.

In the AI and cloud sectors, Alphabet (GOOGL.US) is thriving across Google Cloud, TPU, and Gemini, while Kakao is accelerating the enhancement of its AI capabilities by establishing 2,040 GPUs early in its own data center. SOOP plans to seek growth through platform integration, AI advancement, and strengthened content partnerships in 2026. In the financial sector, KB Kookmin Bank contributed a New Leap Fund of 56.2 billion won, the largest in the financial industry, and news emerged that Shinhan Card's Apple Pay integration is in the final stages. Personnel reshuffles at major financial institutions are also actively underway, with final candidates for the heads of Busan Bank and Jeonbuk Bank being selected. According to the November Korean Industrial Activity Trends, production and investment improved, but consumption declined, showing a differentiated trend. Manufacturing production displayed varying patterns by sector, and fiscal policy is expected to support the downside of domestic demand until the first half of next year.

Today's Research Highlights

• 1.  Hana Securities - Dongfang Electric (600875.CH): As one of China's top three power equipment manufacturers, Dongfang Electric is the leading company with a 40% market share in China's nuclear power equipment market. It has secured technology for large nuclear power generation facilities in the 1 million to 1.75 million kW class and leads in SMR and nuclear fusion technologies, drawing attention as a major beneficiary of China's nuclear power expansion and large hydropower projects.
  

• 2.  Shinhan Securities - Micron (MU.US): As the upward trend in memory prices continues, the upward revision of Micron's 2026 profit estimates is expected to accelerate. This indicates that the recovery of the semiconductor industry is in full swing, raising expectations for earnings improvements among related companies.
  

• 3.  Eugene Investment & Securities - U.S. New Power Generation Capacity Trends: According to data from the U.S. Energy Information Administration (EIA), all net additions to U.S. new power generation capacity in 2025 will be entirely composed of renewable energy and BESS (Battery Energy Storage Systems), and this trend is expected to continue into 2026. This is analyzed as a key factor supporting the solid growth of the renewable energy industry.

Epoch View: Investment Implications

The domestic stock market wrapped up 2025 with a record-breaking annual gain of 75.6%. Despite the emergence of year-end profit-taking, the solid performance of large-cap semiconductor stocks such as Samsung Electronics and SK hynix effectively supported the index's downside, proving to be the market's core driver. This is considered to reflect the market's strong expectations for a recovery in the memory semiconductor industry.

In overseas markets, weakness was seen primarily in U.S. technology stocks, but the energy and telecommunication services sectors showed relative strength. In particular, the renewable energy and nuclear power generation sectors are securing medium- to long-term growth momentum thanks to policy support and technological innovation. New power generation capacity in the U.S. is shifting toward renewable energy and BESS, and as seen in the case of China's Dongfang Electric, the growth potential of the nuclear power market is also noteworthy. Continuous growth is also expected in the AI and cloud sectors through major companies' expanded investments and technological advancements.

Although differences of opinion regarding the timing of interest rate cuts were confirmed in the FOMC minutes, the market absorbed this in a limited manner without exhibiting significant volatility. This suggests that expectations for interest rate cuts remain valid, but the possibility of pace adjustments should also be kept in mind.

Investors need to maintain continued interest in structural growth themes such as semiconductors, renewable energy, and AI, even amid short-term profit-taking pressure. In particular, a selective approach focusing on companies with visible earnings improvements and sectors expected to benefit from policies is crucial. Changes in the financial sector and industrial activity trends should also be utilized as important indicators for reading macroeconomic environment changes when formulating investment strategies.

This content was generated by News Epoch's proprietary AI algorithm, which tracks data from major domestic securities firms in real-time.