[R&E] U.S. Interest Rate Drop Triggered by Employment Shock; KOSPI Seeks Rebound with Earnings Momentum from Korea Investment Holdings and Lotte Wellfood

[R&E: Research & Epoch] This is News Epoch's signature report that provides a perspective on a new era of investment through the integrated analysis of global financial data and domestic securities firms' research.

Global Market Brief

Last Friday (August 7), the New York stock market reached new all-time highs as it welcomed the news of slowing U.S. employment indicators as a positive factor. U.S. non-farm payrolls in July significantly missed the market expectation of an 80,000 increase, recording a decrease of 23,000. Employment figures for May and June were also revised downward from previous announcements, making the cracks in the labor market evident. The unemployment rate fell slightly to 4.1% due to the impact of a decline in the economically active population, but the quantitative contraction in employment acted as a decisive factor justifying the Federal Reserve's (Fed) path toward interest rate cuts.

As a result, the yield on the 10-year U.S. Treasury note fell to the 4.65% level, and the yield on the 2-year note, which is sensitive to monetary policy, also dropped to the 4.20% level, ending with a decline in bond yields. As expectations for a rate freeze in September strengthened, the dollar index also fell by 0.39% to record 99.539 points. The New York stock market closed at an all-time high as the valuation burden eased due to falling interest rates, with the S&P 500 index rising 0.62% to 7,757.64 points and the Dow Jones Industrial Average rising 0.28% to 54,036.93 points. The technology-heavy Nasdaq Composite Index also rose 1.30% to record 26,690.62 points. International oil prices saw West Texas Intermediate (WTI) trading at around $78.18 per barrel. The decline in global interest rates and the weakening of the dollar suggest that this will be a direct catalyst in creating an environment for capital inflows into emerging market stocks.

Domestic Market Overview

Prior to the New York stock market reaching an all-time high, the domestic financial market closed lower last Friday due to selling pressure concentrated in the semiconductor sector. The KOSPI index fell 0.60% from the previous trading day to 6,258.77 points, and the KOSDAQ index also finished 0.36% lower at 798.81 points. In the KOSPI market, SK Hynix led the index correction, dropping 4.88% on concerns over HBM unit prices, while Samsung Electronics closed 0.22% higher, supporting the lower bound.

In the Seoul foreign exchange market, the dollar-won exchange rate closed at 1,419.0 won, down from the previous trading day, reflecting the decline in U.S. Treasury yields. The offshore NDF 1-month exchange rate fell further to the 1,407.0 won level, foreshadowing a downward stabilization trend for the dollar-won exchange rate after the market opens on Monday. In the bond market, the yield on 3-year government bonds recorded 3.747%, up 0.2bp from the previous trading day. Today, the domestic regular market is expected to digest the effect of falling interest rates due to the U.S. employment shock and the stabilization of the dollar-won exchange rate, forming a structure where differentiated buying will flow into the securities, food and beverage, and eco-friendly infrastructure sectors whose profit improvements have been proven by figures.

Key Industry Issues and Insights

Finance & Securities: Korea Investment Holdings, Profit Strength Proven by Co-Growth of WM and Brokerage
Large domestic securities firms are proving their strong performances based on the recovery of market trading values and structural improvements in the wealth management (WM) sector. Korea Investment Holdings (KOSPI: 071050)'s consolidated net profit attributable to controlling interests for the second quarter of 2026 was KRW 995.9 billion, an 84.7% increase from the same period last year. This figure exceeds the market consensus of KRW 834.6 billion by 19.0%. The key to the earnings improvement lies in the simultaneous growth of retail and wealth management. The brokerage commission income for the second quarter surged by 226.1% year-on-year to KRW 349.7 billion, and the WM commission income recorded a steep growth, increasing by 466.8% year-on-year to KRW 215.8 billion. This is the result of retail clients' balances in other financial products such as pensions, wraps, and trusts increasing by a net KRW 8 trillion during the second quarter, expanding their share within the total product balance from 24% in the same period last year to 36%.

The even profit contributions from non-securities subsidiaries also prove the portfolio diversification effect of the financial holding company. The combined net profit of subsidiaries excluding securities increased by 153% year-on-year. Among the subsidiaries, Korea Value Asset Management's net profit was KRW 154.9 billion, up 29.4% quarter-on-quarter, and Korea Investment Partners' net profit increased by 223% quarter-on-quarter. As the industry enters a period of falling interest rates, capital procurement costs for the securities sector will decrease and retail fund inflows will continue, which is analyzed to further solidify the profit stability of large financial holding companies equipped with diversified revenue models.

Food & Beverage and Distribution: Lotte Wellfood and GS Retail Overcome Domestic Demand Limits with Overseas Expansion and Cost Control
Amid concerns about domestic demand slowdown, companies breaking record performances through overseas market expansion and strict SG&A cost control are drawing attention. Lotte Wellfood (KOSPI: 280360) recorded consolidated sales of KRW 1.1557 trillion and an operating profit of KRW 64.7 billion for the second quarter of 2026, increasing by 8.6% and 88.5% year-on-year, respectively. The operating profit exceeded the market expectation of KRW 47.5 billion by 36.2%. The growth engine is the overseas business division. In the second quarter, overseas confectionery sales achieved a high growth of 27.6% year-on-year, led by growth in India and Kazakhstan. In June, the full operation of the 4th Choco Pie production line in India began, driving the expansion of the high-margin overseas proportion.

In the distribution industry, GS Retail (KOSPI: 007070) recorded an earnings surprise. Its second-quarter operating profit was KRW 109.4 billion, beating the market consensus (KRW 102.3 billion) by 6.9%. The earnings improvement was led by convenience store same-store sales growth (+7.5%), supermarket same-store sales growth (+5.2%), and proactive cost control through product mix improvement. This proves that qualitative growth through store efficiency and distribution channel improvement, rather than simple price hikes, is effective.

Eco-friendly & Energy: CS Wind Benefits from Resumption of U.S. Permits and Supply Oligopolization
Global eco-friendly infrastructure component companies have begun to directly enjoy the benefits of resolving policy uncertainties and market restructuring due to the exit of competitors. CS Wind (KOSPI: 112610), the global leader in wind tower manufacturing, recorded a consolidated sales of KRW 686.4 billion (+5.6% YoY) and an operating profit of KRW 86.0 billion for the second quarter, beating the consensus (KRW 78.7 billion). The recognition of incentives in the substructure division and the improvement of the project mix in the tower and bearing division drove the profit growth.

Above all, the structural changes in the infrastructure environment are positive. On August 6, a U.S. federal court ordered the resumption of permits for new wind power plants, which had been suspended due to the Department of Defense's security review, putting 155 delayed projects amounting to about 44GW back on track for normalization. Furthermore, as major U.S. competitors Arcosa and Broadwind scale back their production facilities starting in 2028 when the AMPC ends, the wind tower production capacity in the U.S. is expected to shrink from the current 10GW level to around 7GW. This suggests that CS Wind's unit price bargaining power and market share in the U.S. market are bound to strengthen in the long term.

Market Signals

• U.S. Employment Indicator Shock: U.S. non-farm payrolls in July decreased by 23,000, significantly missing the market expectation of an 80,000 increase, strengthening expectations for a Fed rate freeze.

• Korea Investment Holdings Q2 Earnings Surprise: Consolidated net profit attributable to controlling interests rose by 84.7% year-on-year to KRW 995.9 billion, exceeding the market consensus by 19.0%.

• Lotte Wellfood's High Global Growth: Second-quarter consolidated operating profit increased by 88.5% year-on-year to KRW 64.7 billion, driven by a 27.6% growth in overseas confectionery sales such as the operation of the 4th Choco Pie plant in India.

• Lifting of Wind Power Infrastructure Regulations: The August 6 order by a U.S. federal court to resume the Department of Defense's wind power permits laid the foundation for the resumption of 155 pending projects scaling about 44GW.

Epoch View: Investment Implications

The shock delivered by the U.S. employment report is both a signal of economic slowdown and a milestone marking the end of the high-interest-rate tunnel that has strangled the global asset market. The downtrend in U.S. Treasury yields and the dollar is a variable that will favorably restore the supply and demand conditions for foreign investors in emerging market stocks. The market's attention is now narrowing down not simply to stocks with excessive index drops, but to companies with the earnings strength to reap the fruits of supply chain realignment in the global market or to break through domestic stagnation in overseas markets. The profit strength of the wealth management portfolio proven by Korea Investment Holdings, Lotte Wellfood's enhancement of overseas operation rates, and CS Wind's securing of dominance in the global oligopoly structure prove that the only key to overcoming short-term volatility lies in the numbers of actual earnings.

This content was generated by 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 collected data and does not constitute a solicitation or recommendation for investment in any specific stock.