[Good Morning Stock Market] "Tesla's 4 Consecutive Quarters of Profit... Alleviated Growth Stock Concerns"

[Asia Economy Reporter Eunmo Koo] Tesla has recorded profits for four consecutive quarters, meeting the inclusion criteria for the S&P 500, which is expected to alleviate some concerns about growth stocks. However, the recent rebound in cyclical stocks warrants careful consideration. While short-term upward momentum is strong, from a mid- to long-term perspective, these stocks are less attractive compared to existing leading sectors such as IT software and healthcare.

◆Daehun Han, SK Securities Researcher=Tesla's highly anticipated Q2 earnings per share (EPS) came in at $2.18, significantly surpassing the expected $0.03 and achieving profits for four consecutive quarters. This means Tesla has met the inclusion criteria for the S&P 500 index. The importance of this earnings report lies in its role as a gauge for growth stocks, which have experienced price pressure due to a short-term surge linked to the S&P 500 inclusion. As of the 21st, growth stocks have risen sharply by 12.5% this year compared to value stocks, which declined by 14.8%. A failure of Tesla to meet earnings expectations and thus miss S&P 500 inclusion could have triggered profit-taking in growth stocks. This development is expected to ease valuation pressures on growth stocks to some extent.

Although major U.S. tech companies still have earnings announcements pending, Tesla's strong performance is likely to ease concerns about overvaluation in growth stocks. Additionally, expectations for the semiconductor sector are rising, with SK Hynix reporting a 205% year-over-year increase in earnings to 1.95 trillion KRW, following Samsung Electronics. The pharmaceutical and bio sectors are also maintaining an upward trend, suggesting continued strong interest in existing leading sectors. However, price pressures have not completely dissipated. Moreover, the recent rebound in cyclical sectors and other economically sensitive stocks has intensified concerns about market direction.

Driven by increased demand from China and expectations for policy and economic activity resumptions worldwide, cyclical stocks have recently rebounded. Reflecting this, copper and silver prices have surged sharply. Considering policy momentum, global demand, and price advantages, cyclical stocks are more attractive in the short term. Earnings estimates have also rebounded. As more countries announce economic reopenings and policies, their attractiveness is expected to increase further. However, from a mid- to long-term perspective, the likelihood of cyclical stocks becoming new leading sectors is low. In other words, their mid- to long-term appeal is lower than that of current leading sectors such as IT software and healthcare. It is advisable to maintain interest in cyclical stocks in the short term but not to change the mid- to long-term investment perspective.

◆Seokhyun Park, KTB Investment & Securities Researcher=South Korea's Q2 GDP contracted by 3.3% quarter-on-quarter. The private sector's growth contribution was -3.1 percentage points, leading the GDP decline, directly caused by a sharp drop in net export growth contribution by -4.1 percentage points. Based on customs clearance data, Q2 exports plunged 20.3% year-over-year, marking six consecutive quarters of negative growth since 2019 and the lowest level in 11 years since Q2 2009's -21.1%.

However, with export recovery underway, there is a high possibility of GDP growth rebounding in the second half of the year. The year-over-year monthly export growth rate bottomed out at -25.5% in April and has been narrowing the negative gap, with a further reduction to single digits expected in July. Export value in July is projected to recover to the $40 billion range for the first time in four months. While the pace of recovery remains crucial, it is judged that both export conditions and GDP growth have passed their bottom.

The domestic stock market is directly influenced by export conditions. Historically, year-over-year export growth rates and KOSPI index gains have been closely correlated. Although recent stock price movements have been somewhat faster than the export recovery pace, considering the leading nature of stock prices, this is not excessive. Given the possibility of gradual recovery in export growth turning positive in the second half, the KOSPI's 4.8% year-over-year gain as of July is expected to continue rising, implying potential attempts to reach new highs.

The key issue is whether the export recovery trend will persist, which ultimately depends on the growth trajectories of the U.S. and China, the two countries that influence the global economy. At present, the outlook remains positively optimistic.

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