Despite Volatility Shaking the Korean Stock Market... "Valuation and Supply-Demand Burdens Have Eased"

Samsung Electronics Profit Forecast Overly Downgraded
Profit Forecasts for KOSPI 200 Companies Excluding Samsung Electronics Are Actually Upwardly Revised
Signs of Easing Pension Fund Selling... Expectation of Investor Deposit Rebound After 'SK바사' Subscription Ends

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Recently, as the domestic stock market showed volatility and fluctuations, an analysis has emerged that excessive corporate valuation (valuation) and supply-demand burdens have been alleviated.

On the 13th, KB Securities analyzed that the recent stock market has gone through a process of easing such burdens. Researcher Hainhwan Ha of KB Securities explained, "The KOSPI 12-month forward price-to-earnings ratio (PER) had risen to 14.7 times, but due to the recent market decline and the effect of the 12-month forward earnings per share (EPS) increase, it has fallen to 13 times," adding, "The current correction (-13%) is similar to the correction (-16%) from August to October last year." He analyzed that through this adjustment, some of the valuation burden has been relieved and there is a high possibility that it will be further alleviated.

First, Samsung Electronics was cited as the reason for the stagnation in earnings forecasts. However, even if Samsung Electronics' earnings forecasts are further downgraded, the extent is expected to be limited. Researcher Ha said, "The earnings forecasts are being revised downward reflecting the impact of the suspension of operations at Samsung Electronics' Austin foundry plant in Texas on the 16th of last month," and explained, "The problem is that the earnings forecasts for 2022 are also being downgraded, which is somewhat excessive." He particularly analyzed that excluding Samsung Electronics, the KOSPI earnings forecasts are merely 'stagnant' rather than 'downgraded.' In the case of KOSPI 200, earnings forecasts are actually being revised upward when Samsung Electronics is excluded.

Meanwhile, the 12-month forward EPS is expected to continue rising. This is seen as a factor that can continuously alleviate valuation burdens. Currently, the KOSPI 2021 net income (controlling interest) forecast is around 135 trillion won, while the 2022 forecast is 21% higher at about 163 trillion won. Researcher Ha projected, "Considering the characteristics of the price-to-earnings ratio reflecting earnings over the next 12 months (12-month forward EPS), as time passes, the 21% higher earnings forecast will be increasingly reflected," adding, "Therefore, the 12-month EPS will continue to rise and valuation burdens can be alleviated."

The easing of supply-demand burdens is also positive. First, the selling pressure from pension funds is showing signs of easing compared to January and February. Researcher Ha explained, "The average daily net selling volume has sharply decreased compared to January and February, which is likely because the large-scale net selling and domestic market correction in January and February reduced the need for additional rebalancing."

The nature of foreign selling must also be examined. Taxation on Contracts for Difference (CFD), which was one of the factors that increased volatility by triggering forced sales on days when the market plunged, is having an impact. Researcher Ha said, "Starting from the 1st of next month, taxation will be applied, and accordingly, the selling pressure to liquidate CFDs is being reflected in foreign supply-demand," explaining, "The high proportion of net selling by foreign securities firms, where CFD trading mainly occurs, supports this."

Since January, investor deposits have also been decreasing. After reaching an all-time high of 74.456 trillion won on January 12, they decreased to 57.637 trillion won as of the 11th. Especially this week, during the SK Bioscience public offering subscription on the 10th and 11th, deposits decreased by more than 10 trillion won. Researcher Ha said, "Looking back at last year's listings of Kakao Games and Big Hit Entertainment, deposits showed a pattern of quickly returning right after the subscription," and forecasted, "While it is necessary to check whether deposits continue to decrease from a mid-term perspective, from a short-term perspective, deposits are highly likely to rebound quickly."

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