KOSPI Still Up in H2…US Treasuries Holding AI Funding Are the Last Variable

Summary

Lee Eun-taek, Asset Allocation Strategy Director at KB Securities, discusses the outlook for Korean equities and the macro forces driving markets. He argues that the July selloff stemmed from concerns over AI spending sustainability and sees US Treasury yields as the critical variable determining whether capital providers continue funding AI capex. He expects the ISM manufacturing cycle to lift the KOSPI higher in H2 and believes Fed rate hike fears will fade, supporting risk assets. He also reaffirms that AI-related memory and semiconductor stocks will lead the market recovery.

• July market turmoil driven by doubt over 'token maximization' and Chinese AI competition
• Big Tech cannot stop AI spending, but capital providers might if interest rates rise too far
• US Treasury yields are the key variable; recent soft US jobs data supports fading rate hike fears
• ISM manufacturing index has risen, signaling robust economic cycle and supporting a KOSPI rebound
• KOSPI historically follows ISM higher, and the current divergence points to catch-up rally
• AI capex cycle remains intact, with inflation not yet forcing a funding cutoff
• Korean AI semiconductor/memory sector expected to remain the market leader
• Fed likely to hold rates steady rather than hike, with inflation not posing an immediate threat