The Kospi Index stayed under pressure on Monday as investors awaited upcoming earnings from SK Hynix and major US tech companies. It fell to 5,477 points, down more than 1.3% from Friday’s close, and now sits about 42% below its year-to-date high of 9,400 points.
Kospi Index drops ahead of SK Hynix earnings
South Korean stocks fell as investors remained concerned about the artificial intelligence sector. Many fear the industry is in a bubble that could burst soon, which would hit the index’s biggest constituents hardest. The AI Stock Bubble Index has jumped to 74.
The main catalyst for the index this week will be the upcoming SK Hynix third-quarter earnings, which will provide more insight into its growth. Analysts expect the results to show that its operating profit rose to between 76.9 trillion won and 77.9 trillion won, which will be the sixth straight record quarter. Revenue is expected to be close to 100 trillion won as the DRAM and NAND prices rose by 22% and 15%, respectively in the last quarter.
SK Hynix’s revenue is being driven by its relationship with Nvidia, the world’s largest GPU maker. Its products are benefiting from demand for Nvidia’s Vera Rubin platform, the company’s latest chip architecture.
In theory, a strong SK Hynix earnings should help its stock bounce back. However, recently, many big-tech stocks are falling even after releasing strong numbers. A good example is Samsung Electronics, whose stock remained on edge after publishing strong preliminary earnings report.
The Kospi Index will also react to the upcoming US big-tech earnings reports, with top companies like Microsoft, Alphabet, and Amazon releasing their numbers. Strong results and forward guidance will help the shares do well as they will confirm that the artificial intelligence boom is continuing.
Falling crude oil prices as geopolitical risks rise
The Kospi Index is also reacting to the ongoing crude oil price retreat. Brent, the global benchmark, dropped to $109.90 from last week’s closing price of $117. The big drop happened even as investors brace for more escalation between the US and Iran.
One reason for the retreat could be that the two sides did not restart their war during the weekend. Nonetheless, with Israel’s election coming up on Tuesday and the US midterm elections happening next week, there is a likelihood that the war will start. The new phase of the war will lead to higher crude oil prices for longer, a move that will affect South Korea’s economy.
Kospi Index technical analysis
KOSPI chart | Source TradingView
The daily chart shows that the Kospi Composite Index has slumped in the past few months, moving from a high of 9,400 in June to 5,467 points today. It is now hovering slightly above the crucial support level of 5,272 points, its lowest point in July.
The index is about to form the risky death cross pattern, which happens when the 50-day and 200-day moving averages form a bearish crossover. Also, the two lines of the MACD indicator have moved below the zero line. Therefore, the path of the least resistance is bearish, with the next key target being at 5,000.
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