Institutional and Foreign Investors' Baskets Bet on a Bull Market... Focus on Earnings Stocks Despite Rollercoaster Market Dizziness

Institutions and Foreigners Buy ETFs Profiting from Index Rises... Individuals Bet on Declines
Stock Market Experts Say Earnings Drive Market Rebound... Focus on Stocks with Rising Profit Estimates

[Asia Economy Reporter Lee Seon-ae] As the stock market experiences extreme volatility resembling a rollercoaster ride, individual investors' anxiety is rising. However, looking at the shopping lists of institutional and foreign investors, it appears they are leaning towards a rise in the domestic stock market. Accordingly, experts advise paying attention to stocks with upward earnings revisions. The reasoning is that the more volatile the market, the stronger the stocks with sustained upward earnings revisions tend to be. Whether growth stocks or cyclical stocks, it is essential to select stocks with consistently rising profit forecasts.

According to the Korea Exchange on the 15th, the stocks most net purchased by institutions last week (8th?12th) were KODEX 200 (104.8 billion KRW) and KODEX Leverage (50.2 billion KRW). KODEX 200 is an ETF (Exchange-Traded Fund) that tracks the returns of the KOSPI 200 index, which consists of 200 representative stocks of the Korean stock market. KODEX Leverage is an ETF that bets on stock price increases, allowing investors to earn twice the index's rate of increase when the index rises.

Foreign investors also focused their shopping on representative stocks known for upward earnings revisions last week, such as POSCO, LG Chem, KB Financial Group, SK Hynix, and Samsung Fire & Marine Insurance. They purchased 40.6 billion KRW worth of KODEX Leverage, which bets on index rises. On the other hand, individual investors appeared to bet on index declines. Among their top net purchases last week were Samsung Electronics, Samsung Electronics Preferred, and KODEX 200 Futures Inverse 2x, which yields twice the profit when the KOSPI 200 index falls.

◆Earnings to Lead Stock Market Rebound

The securities industry expects corporate earnings to drive the stock market rebound. An So-eun, a researcher at IBK Investment & Securities, said, "Although rising interest rates will reduce liquidity supply, if corporate earnings improve beyond that, the risk burden from interest rates will be offset," adding, "As earnings expectations rise, they will support the stock market rebound."

Accordingly, there is a flood of advice to buy growth stocks with upward earnings forecasts during market corrections. Moon Jong-jin, a researcher at Kyobo Securities, said, "Recently, the correction in growth sectors represented by BBIG (secondary batteries, bio, internet) has reduced valuation pressure in these sectors," adding, "Within the BBIG sectors, stocks with sustained upward earnings revisions present buying opportunities." He cited LG Chem, NAVER, Kakao, Samsung Biologics, and NCSoft as examples.

Stocks that have improved earnings but still have low price-to-earnings ratios (PER), indicating undervaluation, are also recommended. Lee Kyung-soo, a researcher at Hana Financial Investment, said, "Ultimately, stocks with low PER and high first-quarter earnings estimates will serve as very strong supports in the current volatile market," adding, "Among KRX300 stocks, those with low PER this year and a 50% or more increase in first-quarter earnings estimates include Kiwoom Securities, Kumho Petrochemical, Korea Financial Group, GS, Dongkuk Steel, Shinhan Financial Group, Hana Financial Group, GS Home Shopping, Industrial Bank of Korea, LG Display, Samsung Life Insurance, Silicon Works, and LG."

◆Focus on Cash-Rich Companies Amid Interest Rate Volatility

There is also analysis suggesting that stocks with more than 10% growth in sales and operating profit this year, which have abundant cash assets or healthy cash flow, will be less affected by interest rate volatility. KakaoPay Securities identified companies with a market capitalization over 500 billion KRW and a 60-day average trading volume exceeding 2 billion KRW that have sales and operating profit growth over 10%, including Daehan Petrochemical, Neowiz, Hankook Tire & Technology, Daelim Construction, Hyundai Department Store, S&T Motiv, Hyundai Steel, KC Tech, Hyundai Wia, and Lotte Chemical.

Investment advice was also given that stocks capable of withstanding rising interest rates are those whose earnings outlook improves faster this year than next year. Ahn Hyun-guk, a researcher at Hanwha Investment & Securities, explained, "Stocks that can endure rising interest rates are those whose earnings outlook has improved more rapidly this year than next, despite the sharp rise in interest rates since late November last year," adding, "Stocks meeting this criterion include LG Display, CJ, Poongsan, Hyundai Construction Equipment, Lotte Chilsung, Shinsegae, and Hansae."

There are also many forecasts suggesting that attention should be paid to consumer discretionary stocks until the first half of the year due to the expansion of consumption improvement. Daishin Securities advised focusing on consumer discretionary stocks in the KOSPI with operating profit growth rates exceeding 20%. Kim Ji-yoon, a researcher at Daishin Securities, said, "Stocks of interest include Kangwon Land, Hotel Shilla, J Contentree, Shinsegae, Shinsegae International, Hyundai Department Store, Lotte Shopping, Cosmax, and Kolmar Korea," adding, "However, it is likely that a rotation market between growth stocks and consumer discretionary stocks will continue rather than a dominant rally."

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