[Good Morning Stock Market] Focus on US-Iran Military Clash Intensity... Short-term Profit-taking Pressure

The Phase of Global Liquidity Expansion Is Expected to Continue

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Since the death of Quds Force Commander Soleimani of the Iranian Revolutionary Guard Corps in a U.S. airstrike ordered by President Donald Trump on the 3rd (local time), the military conflict between the two countries has emerged as the biggest variable in the stock market. Although the possibility of a full-scale war is low, it is analyzed that the trend should be monitored and used as a buying opportunity depending on the intensity of Iran's future retaliation. Meanwhile, as the preference for risky assets amid liquidity continues to rise, global liquidity is expected to flow into both developed and emerging market stocks.

◆ Jo Yeonju, NH Investment & Securities Researcher = Iran's Supreme Leader Ayatollah Ali Khamenei declared that after a three-day mourning period for Commander Soleimani, Iran would immediately retaliate against the U.S. In response, U.S. President Trump stated that he is ready to strike back at 52 important Iranian targets. The possibility of military clashes between the two countries has increased the preference for safe-haven assets.

However, President Trump announced that the strike was ordered to prevent war after discovering that Commander Soleimani was planning attacks on U.S. diplomats and soldiers. He also stated that the goal is not regime change in Iran and that war is not desired. His remark that Iran has never won a war nor lost in negotiations indirectly suggests the necessity of negotiations.

Considering Iran's economic power, the possibility of a full-scale war is low. Since President Trump withdrew from the nuclear deal with Iran last May and imposed economic sanctions for six months, Iran appears to lack the economic capacity to engage in full-scale war with the U.S. Given that allies such as the UK, France, and Germany officially support the U.S. military, launching a full-scale war seems somewhat unrealistic.

From a stock price perspective, reflecting recent valuation burdens and bullish trends, there may be short-term profit-taking desires. The preference for safe-haven assets will vary depending on the intensity of Iran's retaliation. If stock prices fall excessively, it should be used as a buying opportunity.

◆ Lee Jaeman, Hana Financial Investment Researcher = The premise of a global liquidity expansion phase remains unchanged. The Emerging Market Weighted Risk Appetite Index, which measures liquidity's preference for risky assets, continues to maintain an upward trend, so global liquidity is expected to flow into both developed and emerging market stocks.

Seasonally, the momentum style index (based on the S&P 500 index: growth/value/momentum/quality/dividend) recorded the highest returns in the first quarter. Both the U.S. and domestic stock markets showed that improvements in earnings estimates (momentum) had a significant impact on stock returns.

Regarding changes in U.S. momentum, expectations for private investment improvement among economic indicators are high. Considering the rebound in state-level manufacturing capital expenditure indices and that S&P 500 companies may spend more cash on mergers and acquisitions (M&A), capital expenditures (CAPEX), and research and development (R&D) rather than shareholder returns, private investment is likely to improve.

The sector leading U.S. CAPEX is healthcare. However, it is also noteworthy that estimates for the IT sector have been rapidly improving recently. The reversal of U.S. IT CAPEX positively influences the improvement of domestic IT earnings estimates. Earnings estimates for domestic IT sector companies, excluding Samsung Electronics and SK Hynix, are improving, and stock prices are expected to show strength. Considering the expected returns and market capitalization weights of sectors likely to improve earnings estimates within the KOSPI (IT + materials + industrials), expected returns are projected to increase by 7%. In the global liquidity expansion phase, the lowest point of the 12-month forward price-to-book ratio (PBR) for KOSPI is expected to be 0.81 times. The expected band for KOSPI in the first quarter is presented as 2090 to 2300.

This content was produced with the assistance of AI translation services.