The Nikkei Average rebounded against a backdrop of gains in the SOX Index and declining KOSPI volatility. Following the impact of the US employment report and a rebound in AI and semiconductor stocks, attention is expected to focus on September dividend capture and the performance of standout AI-related stocks.
In the US market, long-term yields fell after the July employment report released on 7 August. The Dow Jones Industrial Average rebounded across the board, rising $151.83 from the previous day to $54,036.93, while the Nasdaq Composite gained 342.26 points to 26,690.62 and the S&P 500 rose 47.68 points to 7,757.64. Lower long-term yields prompted buying in technology and semiconductor stocks, supporting the overall strength of the US market.
On 10 August, the Nikkei Average posted a sharp rebound for the first time in 3 trading days, rising ¥1,363.51 from the previous weekend to close at ¥66,970.22. From its late-July low of ¥64,448.90, it had risen ¥6,521.32, an increase of approximately 10.79%. The main driver of the rebound was a bottoming-out and recovery in AI- and semiconductor-related stocks, while the SOX Index surged 308.09 points from the previous day to 12,356.79.
In the South Korean market, KOSPI margin balances fell sharply, pointing to an expected decline in volatility. Margin balances had fallen to KRW 27.4 trillion by 3 August, down substantially from KRW 38.6 trillion on 24 June. Regulatory tightening also contributed, while trading volumes in leveraged ETFs tracking individual stocks declined significantly. This has led to the view that a continued rebound in the SOX Index could support gains in Japanese AI and semiconductor stocks.
As an investment strategy, the view was that the Nikkei Average should remain firm while support from its 5-day moving average holds, although the medium-term trend could turn depending on the direction of the 25-day moving average. For individual stocks, views included prioritising September dividend capture and favouring domestic-demand value stocks with high dividend yields, low P/E ratios and low P/B ratios, as well as targeting a rebound in AI- and semiconductor-related stocks while accepting the associated volatility.