[R&E] Inflation Concerns Reignite on US Employment Surprise… Semiconductor Exports Surge 195%, Geopolitical Risks Escalate on Oil Price Spike

[R&E: Research & Epoch]
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Global Market Brief

The US labor market showed signs of overheating, going beyond being solid. The number of non-farm payroll jobs in March, announced last weekend, increased by 178,000, significantly exceeding the market expectation of 65,000. The unemployment rate fell by 0.1 percentage point from the previous month to 4.3%. This proves that the US economy is maintaining a strong recovery. However, signs that labor demand remains strong are a factor that increases the possibility of a prolonged tightening stance by the US Federal Reserve and the resulting upward pressure on interest rates. In fact, the US 2-year Treasury yield recorded 3.840%, up 4.3bp from the previous day, and the 10-year Treasury yield also rose 3.6bp to 4.341%.

Meanwhile, international oil prices rose due to heightened geopolitical risks. West Texas Intermediate (WTI) crude oil closed at $111.5, up 11.4% from the previous day. Former US President Donald Trump's suggestion of an attack on major Iranian infrastructure through social media acted as a direct trigger. Tension in the Middle East escalated as the speaker of the Iranian parliament declared in response that they would target facilities owned by the US or related countries. This is a key variable that increases the instability of the global supply chain, induces a rise in energy costs, and thereby aggravates overall inflationary pressure.

Domestic Market Summary

On the previous trading day, the domestic stock market closed higher, boosted by strong US employment indicators and expectations of improved semiconductor industry conditions. The KOSPI successfully rebounded, recording 5,377.30, up 2.74% from the previous day. The KOSDAQ also closed at 1,063.75, up 0.70%. However, the USD/KRW exchange rate remained at a high level, recording 1,510.9 KRW, which reflects the downward pressure on the won driven by concerns over a prolonged tightening by the US Federal Reserve and the rise in international oil prices.

The yield on domestic 3-year government bonds fell to 3.445%, but the weak won and the possibility of rising import prices increase concerns about inflation reigniting. Meritz Securities revised its forecast for South Korea's 2026 Consumer Price Index (CPI) upward from the previous 2.3% to 2.6%, and analyzed that it would peak at 3.0% in the third quarter. The uncertainty of the global macroeconomy is expected to increase the volatility of the domestic stock market.

Key Industry Issues and Insights

Semiconductors: Accelerated Recovery in Memory Cycle, Driving Earnings for Domestic Companies

The export amount of memory semiconductors in March was $990 million, surging by 195% compared to the same period last year. In particular, DRAM exports and NAND exports skyrocketed by 262% and 360%, respectively. The export unit price of NAND rose by 22% compared to the previous month, proving a strong recovery trend in the semiconductor industry. Such performance is primarily driven by an increase in demand for AI servers and an expanded proportion of demand for server solid-state drives. The supply of HBM, an essential good in the AI era, is estimated to increase by 64% year-on-year in 2026, and Samsung Electronics (KRX: 005930) is highly likely to record a first-quarter operating profit of 49 trillion won, significantly exceeding market expectations. The analysis that the memory sector accounts for 94.1% of total operating profit and that HBM sales will increase by 219% year-on-year suggests that domestic semiconductor companies are securing leadership in the AI semiconductor market.

Secondary Batteries: Deepening Earnings Differentiation Among Companies, Competition to Secure New Production Bases

The first-quarter earnings of secondary battery materials companies showed mixed results. EcoPro BM (KOSDAQ: 247540) recorded an operating profit of 10.2 billion won in the first quarter, significantly exceeding market expectations. The commencement of line operations at its Hungary plant starting in May is positive for securing future growth engines. L&F (KOSDAQ: 066970) also exceeded market expectations with a first-quarter operating profit of 80.8 billion won, up 9% year-on-year. This is interpreted as the result of successfully diversifying its portfolio while expanding LFP production capacity. On the other hand, POSCO FUTURE M (KRX: 003670) fell slightly short of market expectations with a first-quarter operating profit of 4.6 billion won, a decrease of 73.4% year-on-year. This means that amid downward pressure on the overall growth of the secondary battery industry, the structure has shifted so that individual companies' technological prowess and strategies to secure overseas production bases directly translate into earnings.

Automobiles: South Korean Companies Put Up a Good Defense Amid EV Market Slowdown

Concerns over the slowdown of the global electric vehicle market appear to be materializing. Tesla (NASDAQ: TSLA) recorded global sales of 358,000 units in the first quarter, falling short of market expectations. The fact that more than 50,000 units of unsold inventory have piled up adds to demand slowdown and price competition pressure. BYD (HKG: 1211) also saw its wholesale EV sales in March decline by 20% compared to the same period last year. In contrast, Hyundai Motor (KRX: 005380) saw its US market sales in the first quarter increase by 1% year-on-year, and Kia (KRX: 000270) increased by 4.1%, putting up a good defense in the US market. This shows that the strategy of diversifying the eco-friendly vehicle lineup, including hybrids, is working effectively during a period of stagnant EV demand.

Internet: NAVER Target Price Downgraded, Growing Pains of a Platform Company

NAVER (KRX: 035420)'s fair value has been revised down from the previous 410,000 won to 330,000 won. The main reason is that the merger schedule with its key subsidiary, Dunamu, was delayed to September. Although the first-quarter consolidated operating profit increased by 8.8% year-on-year and Smart Store transaction volume showed solid growth, the delay of large-scale M&As and adjustment of market expectations act as downward pressure on the stock price. This suggests that the success or failure of strategic alliances and investment plans to secure growth engines is a key variable in evaluating corporate value.

Market Signals

• Overheating US Labor Market: The number of non-farm payroll jobs in March increased by 178,000, significantly exceeding market expectations and proving solid labor demand.

• Strong Memory Semiconductor Exports: The export amount of memory semiconductors in March increased by 195% compared to the previous year, accelerating the recovery trend of the industry.

• Oil Price Surge and Geopolitical Crisis: WTI crude oil prices rose by 11.4% from the previous day to record $111.5, stimulating concerns about global inflation.

• Upward Revision of South Korea's Inflation Forecast: The forecast for the 2026 Consumer Price Index was revised upward to 2.6%, and is expected to peak at 3.0% in the third quarter.

• EV Demand Slowdown: Tesla (NASDAQ: TSLA)'s first-quarter sales fell short of expectations, spreading concerns about shrinking demand across the market.

Epoch View: Investment Implications

The global economy is facing multiple challenges: the strong recovery of the US labor market, the possibility of reigniting inflation, and geopolitical instability in the Middle East. This is transmitting price and exchange rate pressures to the domestic market through a strong dollar and rising international oil prices.

However, domestic industries are showing differentiated trends, exhibiting a solid recovery centered around specific sectors, such as surging memory semiconductor exports and rapidly increasing demand for AI and HBM. During the structural transition period of the EV market, poor sales by major companies have become apparent, whereas companies that strengthened their hybrid lineups proved their flexible responsiveness. The market is expected to see a continuous selective inflow of funds focused on companies with solid fundamentals and technological innovation capabilities, despite macroeconomic uncertainties.

This content was written through News Epoch's proprietary AI algorithm that tracks and analyzes public data from major domestic securities firm research centers and global financial media in real-time. It is an objective summary based on collected data and does not constitute a solicitation or recommendation to invest in any specific stock.