[R&E] KOSPI Drops 0.53% Yesterday; Value of Semiconductor Component Stocks like LG Innotek and Korea Circuit Rises Amid Burden of Hawkish BOK Monetary Policy Board

[R&E: Research & Epoch] This is News Epoch's signature report that forecasts a new era of investment by comprehensively analyzing global financial data and domestic securities firm research.

Global Market Brief

Yesterday, the New York stock market simultaneously reached new all-time highs, with the Dow recording +0.05%, the S&P 500 +0.58%, and the Nasdaq +0.91%. The U.S. headline PCE price index for April rose 0.2% month-on-month, and the core PCE also increased by 0.2%, seemingly easing market concerns about inflation to some extent.

Remarks from Federal Reserve (Fed) officials maintained a hawkish tone. Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, emphasized that since the labor market remains in good shape, the fight against inflation is the priority.

Meanwhile, international oil prices temporarily fell following reports of an agreement to extend the ceasefire between the U.S. and Iran, but with added news of missile launches by the Iranian military, Middle East geopolitical risks remain unresolved. The US Dollar Index recorded 99.0pt, down 0.2pt from the previous day.

Domestic Market Overview

On the previous trading day, the domestic stock market closed lower as hawkish remarks poured out despite the Bank of Korea Monetary Policy Board's decision to freeze the benchmark interest rate. The KOSPI fell 0.53% from the previous day to 8,185.29p, and the KOSDAQ dropped 2.54% to 1,104.36p.

The Bank of Korea froze the benchmark interest rate at 2.50% for the 8th consecutive time, but monetary policy uncertainty grew as a minority opinion of two members emerged in favor of a rate hike. Bank of Korea Governor Shin Hyun-song raised the forecasts for the economic growth rate (2.0%→2.6%) and the inflation rate (2.2%→2.7%), hinting at the need for an interest rate hike. This acted as pressure for additional rate hikes on the domestic stock market. The KRW/USD exchange rate closed at 1,493.5 won, down 6.5 won from the previous day, showing slight stabilization.

Key Industry Issues and Insights

As competition for dominance in the high-performance IT component market intensifies in the AI era, the value of major domestic companies is being reassessed. LG Innotek (KOSPI: 011070)'s fair value was presented at 1.3 million won, an upward revision of 60.5% from the previous estimate. This is the result of applying the estimated EPS for 2027 (45,325 won) and a Target PER (27.8 times) discounted by 20% compared to the average multiple of three Taiwanese ABF companies. This suggests that the growth potential of high value-added product lines is being actively reflected in the corporate value.

Among small and mid-cap stocks, Korea Circuit (KOSPI: 007810) is selected as the top pick. The fair value of 160,000 won is a 42.9% upward revision from the previous estimate. Separate operating profits for 2026 and 2027 are forecast to grow by 131.4% and 59.6%, respectively. Positive factors acted in combination, including the generation of SoCAMM sample sales for North American clients, mass production of MCP substrates for LPDDR in the second quarter, an increase in FC-CSP substrate volume, and the successful unit price hike of package substrates for domestic clients.

Samsung Electro-Mechanics (KOSPI: 009150) also maintained its opinion as a large-cap Top Pick, backed by its concentration of R&D in the AI server and automotive electronics fields. MLCCs and FC-BGAs were pointed out as key bottleneck components within the AI value chain, with their utilization rates reaching Full-Capa levels. Yesterday, Samsung Electro-Mechanics's stock price rose by 13.44%.

In the global market as well, Marvell Technology (NASDAQ: MRVL) proved the importance of chip design capabilities, with its stock price surging 126.4% since late March. The fact that Snowflake's stock price soared 36.48% yesterday after signing a 5-year, $6 billion AI infrastructure contract with Amazon Web Services is also evidence of the expanding AI ecosystem. This reveals that the increasing demand for high-performance substrates and modules driven by AI acceleration is leading to earnings improvements and valuation re-ratings for domestic component companies.

In the secondary battery industry, the benefits to domestic companies are highlighted amidst the U.S. supply chain reorganization movements. LG Energy Solution (KOSPI: 373220) saw its stock price rise by 15.25% yesterday after signing an energy storage system (ESS) battery supply contract with DTE Energy in the U.S. Samsung SDI (KOSPI: 006400) also closed up 7.30%.

The U.S. MACR regulations require 60% of battery materials to be sourced from the U.S. or FTA partner countries starting in 2026, and this proportion will expand to 85% in 2030. This provides opportunities for domestic companies equipped with North American local production and technological capabilities while lowering dependence on Chinese products.

POSCO FUTURE M (KOSPI: 003670) is strengthening its omnidirectional battery material supply capabilities through the groundbreaking of an LFP cathode material plant. Because the value of the cathode materials is evaluated at approximately 23 trillion won, analysis suggests a buy recommendation at the current market capitalization of around 20 trillion won.

Market Signals

• HL Holdings (KOSPI: 060980): The target price has been revised upward to 55,000 won, and the total shareholder return yield is expected to reach 7.4%, including a 10 billion won treasury stock cancellation in 2026.

• Chong Kun Dang (KOSPI: 185750): First-quarter operating profit exceeded market consensus. A 'BUY' opinion was presented with a target price of 100,000 won.

• Snowflake (NYSE: SNOW): Stock price surged 36.48% yesterday after signing a 5-year, $6 billion AI infrastructure contract with Amazon Web Services.

• POSCO FUTURE M: Total corporate value is evaluated at 26 trillion won, breaking down into graphite business value of 2.7 trillion won, steel materials value of 0.5 trillion won, and cathode materials value of 23 trillion won.

• Public Participation National Growth Fund: On the first day of launch, more than 88% of the 600 billion won was exhausted, revealing high market interest in advanced strategic industries.

• JNTC (KOSDAQ: 204270): First-quarter revenue recorded 40 billion won (-16.8% YoY), falling short of the consensus (45.6 billion won), but the operating loss was 11.4 billion won, reducing the scale of loss compared to the consensus (20.2 billion won).

Epoch View: Investment Implications

The Bank of Korea's hawkish benchmark interest rate freeze amplifies short-term monetary policy uncertainty and applies downward pressure on the domestic stock market. However, while the U.S. April PCE price index showed an easing trend, the upward revision of domestic inflation and growth rate forecasts acts as a factor keeping the possibility of additional rate hikes within the year open.

Although such a macroeconomic environment can cause a contraction in overall market liquidity, companies proving technological innovation and earnings improvements based on key growth engines like AI and secondary batteries present new investment opportunities. It is determined that industrial structural changes and differentiated competitiveness by company, which transcend the constraints of the macro environment, will drive the market's reassessment.

This content was generated using News Epoch's proprietary AI algorithm, which tracks and analyzes public data from major domestic securities firm research centers and global financial media in real-time.