U.S. 10-Year Yield Tops 5% as Fed, BOJ Near Simultaneous Hikes

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.

1. U.S. 10-Year Yield Breaks Through the 5% Line as Market Bets on a Rate Hike

Key points: The yield on the 10-year U.S. Treasury note reached 5.039% in intraday trading, its highest level since July 2007. It was the third time the yield has topped 5% intraday since just before the global financial crisis, and the probability of a rate increase at the September FOMC meeting priced in by CME FedWatch has risen to 94.5%. The Bank of Japan is also seen as more than 90% likely to raise rates at its monetary policy meeting on the 17th and 18th, and simultaneous increases by the two countries would be the first such case in 20 years, since July 2006. Analysts say that if the Fed opts to resume tightening for the first time in three years and two months, delays in investment plans at AI-related companies could combine with higher discount rates on share prices to weigh directly on growth stocks as a whole.

2. KOSPI Falls for a Fourth Session as Foreigners, Institutions Sell 2.5 Trillion Won [Market Signal]

Key points: The KOSPI closed at 6,627.26, down 0.85% from the previous session, extending its losing streak to a fourth day. Foreign investors and institutions sold a net 1.5735 trillion won and 904.3 billion won, respectively, on the main board alone, while individual investors bought a net 832.4 billion won in a defensive move. Semiconductor shares were weak, with Samsung Electronics down 0.20% and SK hynix (000660.KS) down 0.41%, but the KOSDAQ closed 5.63 points higher as secondary battery names led modest gains, leaving a sharp contrast between the two markets. Daishin Securities said the renewed break above 5.02% in the U.S. 10-year yield, high oil prices and a turn lower in Nasdaq 100 futures combined to increase pressure for foreign outflows.

3. Samsung's U.S. Taylor Fab Ramps Up to Build Tesla Chips From a 22 Trillion Won Order

Key points: Samsung Electronics' plant in Taylor, Texas, recently began producing wafers on a 2-nanometer process, entering the prototype production stage for Tesla's AI5 chip. The move is aimed at fulfilling a $16.5 billion (about 22 trillion won) supply contract with Tesla signed last year, and the start of operations was moved up from the originally planned November as demand for AI chips from big tech companies surged. With foundry lines at the Hwaseong and Pyeongtaek campuses running at capacity and TSMC having exhausted most of its advanced-process capacity as well, observers say the early start at the Taylor fab could serve as a springboard for winning additional customers. If mass-production verification is completed by the end of this year and full supply begins next year, analysts say Samsung could regain the upper hand in its competition with SMIC, whose gap with Samsung in global foundry market share has narrowed to 0.5 percentage point.

4. BlackRock Raises Korean Equities to Overweight as Leverage Concerns Ease [Kojubu]

Key points: BlackRock, the world's largest asset manager, has returned its recommendation on emerging market equities including Korea to "overweight" from "neutral" after three months. The firm judged that deleveraging over the summer had eased volatility pressure, with margin loan balances down 15.4% from their high for the year of 38.6 trillion won. Solid earnings led by Samsung Electronics and SK hynix were also cited as attractions, along with the fact that MSCI emerging market companies' projected earnings growth over the next 12 months, at 34.2%, exceeds that of the United States at 20.3%. Emerging markets' forward price-to-earnings ratio of 10 times is about half the U.S. level of 19.9 times, making valuations clearly appealing, but the assessment added that macroeconomic uncertainty remains a variable in whether the positive view can be sustained.

5. Wall Street Says a Hold Would Be a Bigger Shock, With More Hikes Possible by Year-End

Key points: In a Reuters survey of 101 economists, 86 respondents, or 85%, said they expect a 25-basis-point rate increase at the September FOMC meeting, in contrast to a poll a week earlier in which 70% expected rates to be left unchanged. The interest rate futures market is pricing a 78.1% probability of two or three rate increases across the three FOMC meetings from September to December this year, a sign that the chance of entering an additional tightening cycle is rising quickly. Diane Swonk, chief economist at KPMG, said a 25-basis-point increase could be the beginning of tightening rather than the end, while Bank of America warned that long-term Treasury yields could climb further if the Fed leaves rates unchanged. Others countered that gradual increases do not necessarily lead to weaker equity markets, citing the 12% gain in the S&P 500 while the Fed raised rates by 425 basis points from 2004 to 2006.

6. Mandatory Tender Offer Bill Clears Subcommittee, With Threshold Set at 50% Plus One Share

Key points: An amendment to the Capital Markets Act introducing a mandatory tender offer system, which would guarantee minority shareholders the chance to sell their shares at the same price as a controlling shareholder when management control changes hands, cleared a subcommittee of the National Policy Committee with agreement between the rival parties. The tender offer target was set at 50% plus one share, and the requirement is triggered when a buyer becomes the largest shareholder by acquiring a stake of 25% or more, or when an existing largest shareholder buys additional shares. The purchase price is expected to be set in a presidential decree as the higher of the highest purchase price over the past year and the closing price on the day before the filing, with violations punishable by up to five years in prison or a fine of up to 200 million won. Because M&A deals previously required only securing the largest shareholder's stake, the shift to an obligation to secure a majority stake is expected to bring significant changes to transaction costs and terms in the mergers and acquisitions market.

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