[R&E] Semiconductor Exports Surge 263%, Upward Price Pressure Intensifies... Possibility of Korea Withholding Interest Rate Hikes

[R&E: Research & Epoch]

This is News Epoch's signature report that provides a perspective on a new era of investment through an integrated analysis of global financial data and domestic securities firms' research.

Global Market Brief

Last weekend, the US stock market closed mixed. The Dow Jones Industrial Average (NYSE: DJI) fell 0.56% from the previous day to 47,916.57pt, and the S&P 500 (NYSE: SPX) also dropped 0.11% to 6,816.89pt. On the other hand, the tech-heavy NASDAQ (NASDAQ: IXIC) showed a differentiated trend, rising 0.35% to 22,902.89pt. The US Consumer Price Index (CPI) for March rose 3.3% year-on-year, slightly below the market expectation (3.4%), but still significantly exceeding the Federal Reserve's (Fed) target of 2%. The core CPI rose 2.6% year-on-year, evidencing that inflation pressure persists. The Consumer Sentiment Index recorded an all-time low of 47.6pt, and 1-year expected inflation rose by 1.0%p from the previous month to 4.8%. This suggests that concerns about prolonged high prices are spreading, and analysis indicates that the timing for a benchmark interest rate cut has become even more uncertain.

Geopolitical tensions in the Middle East are a key variable that will drive international oil prices up again. As reports of failed negotiations between the US and Iran and the possibility of a blockade of the Strait of Hormuz continue, West Texas Intermediate (WTI) crude fell 1.33% from the previous day to record $96.57, but the market is warning of the possibility of it breaking through $100. This is a factor that aggravates the cost burden across the global supply chain and intensifies inflation pressure on countries highly dependent on raw material imports. Meanwhile, China's Producer Price Index (PPI) for March rose 0.5% year-on-year, rebounding for the first time in 42 months. This means that the recovery of China's economic activity has led to an increase in manufacturing producer prices, and it is interpreted as a positive signal for the recovery of global demand.

Domestic Market Overview

Today, the domestic stock market is certain to make a positive start, backed by the strength of US tech stocks and strong semiconductor exports. The previous day, the KOSPI rose 1.40% to 5,858.87pt, and the KOSDAQ went up 1.64% to 1,093.63pt. This is the result of a combination of expectations for the improvement of the global semiconductor industry conditions and prospects for earnings improvement of domestic companies. The Bank of Korea unanimously froze the benchmark interest rate at 2.50% for the 7th consecutive time at the April Monetary Policy Board meeting. The BOK expects this year's inflation rate to stay in the mid-to-late 2% range, exceeding the previous forecast (2.2%), while anticipating the growth rate to fall short of the forecast (2.0%). Despite high price pressure, it appears to maintain a cautious monetary policy stance by simultaneously recognizing concerns about an economic slowdown. This judgment is coupled with the volatility of the KRW/USD exchange rate, and it is highly likely that the strong dollar pressure due to Middle East risks will further drive up the exchange rate.

Key Industry Issues and Insights

The semiconductor industry, the core engine of the Korean economy, recorded an overwhelming export growth rate and exceeded market expectations. The memory semiconductor export value in March surged by 263.1% year-on-year to $5.4894 billion. In particular, the DRAM export value surged by a whopping 373.6% year-on-year to $2.95956 billion, and the export unit price also rose by 296.3% to $73,996/kg. This proves that demand for high value-added products such as AI servers and High Bandwidth Memory (HBM) is solid, showing that Korea's IT export competitiveness has taken a structural leap forward. However, the prospect that the DRAM price increase rate will ease from 70% in the first quarter to 30~50% in the second quarter suggests the possibility of a short-term price adjustment. SK hynix (000660) plans to ship the industry's first 321-layer QLC cSSD and supply it to Dell (NYSE: DELL), and Samsung Electronics (005930) is focusing on securing competitiveness in fine processes through the 2-nanometer process at the Taylor plant and the operation of 1c DRAM in Pyeongtaek. On the other hand, the supply and demand difficulties of domestic fabless companies due to the prolonged memory shortage are a challenge to be solved across the industry.

The cosmetics and household consumer goods sector continues to achieve high growth through overseas market expansion. APR (278470) saw its first-quarter consolidated revenue surge by 123% year-on-year to 592.3 billion won, and its operating profit also increased by 164% to 143.9 billion won. In particular, cosmetics business revenue grew by 185%, generating more than 40 billion won in new revenue from European online channels alone. Coway (021240) also recorded a first-quarter operating profit of 245.2 billion won, exceeding the market expectation (233.0 billion won). Along with robust sales volume, the disclosure of share repurchases by major shareholder Netmarble (251270) and the scheduled implementation of quarterly dividends are factors that simultaneously increase corporate value and the attractiveness of shareholder returns. Analysts say that K-beauty and consumer goods companies are establishing a firm position in the global market based on their product competitiveness.

The domestic power industry is facing a double whammy of slowing demand and a drop in selling unit prices. Electricity sales volume in February stood at 47.1TWh, increasing by a mere 0.2% year-on-year, and the average selling unit price fell by 0.4% to 173.90 won/kWh. This is the first unit price drop since September 2021. Changes in the composition of power generation sources, such as a decrease in the nuclear power utilization rate and an increase in the bituminous coal utilization rate, affected the drop in unit prices. This acts as a direct pressure on the profitability of power generation operators and suggests that improving energy efficiency and diversifying power generation sources are essential. The upward pressure on international oil prices due to Middle East risks is expected to become an additional cost burden for the domestic power industry, which is highly dependent on fossil fuels.

Market Signals

• Explosive Semiconductor Exports: March memory export value increased by 263.1% year-on-year, driving a strong export recovery trend

• Deepening Oil Price Instability: The risk of oil prices breaking through $100 persists due to concerns over the failed US-Iran negotiations and the blockade of the Strait of Hormuz

• Bank of Korea Freezes Interest Rates: Freezing the benchmark interest rate at 2.50% for the 7th consecutive time, maintaining a cautious move between high prices and low growth

• K-Beauty Global Strides: APR (278470) recorded remarkable achievements in overseas markets, including a 123% surge in revenue

• US Consumer Sentiment Shrinks: The University of Michigan's Consumer Sentiment Index recorded an all-time low, suggesting the possibility of a consumer slowdown due to high prices

Epoch View: Investment Implications

Uncertainty in the global economy is intensifying due to geopolitical tensions in the Middle East and inflation pressure in the US. The volatility of raw material prices risks increasing corporate cost burdens and weakening consumer purchasing power. However, the Korean economy has secured a solid upward momentum based on overwhelming semiconductor export growth. In particular, the record increase in DRAM exports evidences leadership in the high value-added memory market, the core of the AI era. The overseas expansion of K-beauty is also a new growth engine that has overcome the limitations of domestic demand. The export-led Korean economy is expected to maintain its strength using the semiconductor cycle as a stepping stone, but Middle East oil price volatility and whether US consumption will slow down remain major targets for risk management.

This content was written through News Epoch's proprietary AI algorithm, which tracks and analyzes public data from research centers of major domestic securities firms and global financial media in real-time. It is an objective summary based on the collected data, and it is clarified that this is not an investment solicitation or recommendation for any specific stock.