Rate hike, the market held out… What's the real variable for the September market? | Lee Seon-yeop, CEO of AFW Partners

Summary

Lee Seon-yeop, CEO of AFW Partners, argues the Fed's rate hike was a credibility-restoring move that stabilized long-term Treasury yields for now, while oil and war remain the key variables for inflation and rates. He sees yen carry-trade unwind fears as overdone, views Japanese equities and trading houses as increasingly attractive, and takes a differentiated view on Korean exporters: autos face earnings pressure, while semiconductors' uptrend is intact. He also says low Korean earnings expectations may cushion the market, with the US-China summit as the main September risk.

• The Fed's hike and Kevin Warsh's hawkish stance restored policy credibility and helped stabilize long-term Treasury yields.
• Oil and geopolitics, especially Middle East and Ukraine war risks, are the key variables for inflation and future rate hikes.
• Yen carry-trade unwind fears look overdone because US and Japanese rates are moving in the same direction and yen borrowings may be reinvested in Japan.
• Japanese equities and trading companies look more attractive as domestic stocks and real estate rise and Buffett's investments validate the market.
• Korean third-quarter earnings expectations are already low; autos face further pressure, while semiconductors' longer-term trend remains intact.
• The US-China summit is the main September risk because concessions on China supply chains could hurt Korean companies that benefited from China's exclusion.
• Micron earnings and inflation data are not seen as major negative catalysts, and better-than-feared data could help sentiment.