KOSPI to Reach 3500... Expectations for Global Economy and Corporate Earnings

Survey of 10 Securities Firms' Research Center Heads
Q2 Outlook at 2800-3500 Range
Strong Trend Expected Possibly Until Early Q4

[Asia Economy Reporter Song Hwajeong] As the KOSPI reached an all-time high and just completed a correction, attention is focused on how long this current bullish trend will continue. Heads of research centers at securities firms forecast that the upward trend will persist until as early as the second quarter or as late as early fourth quarter.

On the 21st, Asia Economy Newspaper conducted a survey of heads of research centers at 10 securities firms, who predicted that the KOSPI will move within the 2800 to 3500 range in the second quarter. The previous day, the KOSPI closed at 3220.70, up 0.68% from the previous trading day, marking the first time it surpassed the 3220 level. This closing price record is the highest since January 25 (3208.99), three months ago.

It will reach 3500... Bullish trend may last until early fourth quarter

Research center heads cited expectations of global economic recovery and strong corporate earnings as factors behind the current bullish trend. Seo Cheolsu, head of the research center at Mirae Asset Securities, said, "Amid persistent expectations of global economic recovery, the continued liquidity supply by central banks worldwide, including the U.S. Federal Reserve (Fed), has spread risk asset preference sentiment. Furthermore, inflationary pressures are estimated to be temporary factors, reducing the likelihood of capital outflows, which is also a positive factor. Additionally, the expanding expectations of corporate earnings improvements have influenced the market."

In particular, this rise was led by foreigners, with an analysis that a favorable environment for foreign capital inflow was created as profit estimates for domestic companies were rapidly revised upward. Jung Yongtaek, head of the research division at IBK Investment & Securities, said, "In Korea, where the export manufacturing sector has a high proportion, a trickle-down effect is expected from the recovery in U.S. demand, and annual corporate profit estimates are maintaining a steady upward trend. Especially compared to global and emerging markets, Korea’s profit estimate revisions are stronger, creating a favorable environment for foreign capital inflow. In fact, foreign capital flows have significantly shifted to net inflows since April, supporting the stock market rise."

Opinions differed on how long this bullish trend will last. It is expected to continue until mid-second quarter at the shortest, or early fourth quarter at the longest. Kim Jisan, head of the research center at Kiwoom Securities, said, "I believe the KOSPI has additional upward potential to reach 3400. The 3400 level is expected to be achieved during the third quarter, but concerns such as tapering (reduction of quantitative easing) may re-emerge toward the end of the year." Shin Dongjun, head of the research center at KB Securities, said, "The bullish trend will continue until the Fed’s tightening cycle and full-scale tax increase discussions begin."

Those with a shorter outlook see a turning point in May. Kim Seunghyun, head of the research center at Yuanta Securities, explained, "Considering the base effect and liquidity effect fading in the second quarter, as well as the strong dollar, a turning point is expected in May, with the index reaching a peak. After the second quarter, it is uncertain whether foreign buying will continue amid a strong dollar environment."

Stocks to watch are those with high earnings expectations

The keyword for stocks to watch in this bullish market is ‘earnings.’ Yoon Changyong, head of the research center at Shinhan Financial Investment, said, "The biggest variable affecting the stock market is earnings. It is most important whether earnings accompany the resumption of economic activities." Yoon advised focusing on companies such as semiconductors and secondary batteries that can expand investments and increase earnings based on abundant cash flow.

Stocks benefiting from economic recovery and supply shortages are also noteworthy. Yoo Jongwoo, head of the research center at Korea Investment & Securities, said, "Considering the gradual resumption of economic activities and the phase of government bond yield stabilization, it is necessary to increase investment weight in consumer goods and small-to-mid-cap growth stocks. Since corporate activities have not fully recovered to pre-COVID-19 levels, we maintain a positive view on materials such as steel and chemicals, and industrial goods such as construction, machinery, and transportation, which can benefit from economic recovery and supply shortages."

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