KOSPI Eyes Surpassing 3300 Next Month

[Asia Economy Reporter Hwang Junho] Next month, the expected KOSPI band by securities firms is projected to be at least the 3000 level. There are also forecasts that it could surpass 3300 or even reach 3550. Despite recent concerns over U.S. inflation and the resulting liquidity tightening (reduction in asset purchases), the stock market outlook remains relatively positive.

KOSPI up to 3550 in June

Hana Financial Investment on the 31st presented the expected KOSPI band for next month as 3090 to 3350. Considering the rising KOSPI earnings estimates, this figure reflects a potential movement range of -5% to 8% compared to the current level. Korea Asset Investment Securities anticipates a reversal in foreign net selling and expects the band to remain the same as May’s forecast at 3000 to 3300. Korea Investment & Securities applied a fair value approach using a forward price-to-earnings ratio of 11.5 to 13.5 times, setting the target range at 3000 to 3550. This month, the market’s high was 3255 and the low was 3103. The average until the 25th was 3166, which is higher than in April.

The expected band for next month is a positive outlook considering the increased possibility of tightening due to inflation. The U.S. liquidity reduction leads to tightening in neighboring countries like South Korea, which dampens stock market momentum. Securities firms suggest that the base effect of inflation will subside and that restrictions on rising commodity prices, a major factor in inflation, are beginning. Kim Daejun, a researcher at Korea Investment & Securities, analyzed, "The likelihood of a Great Inflation like in the 1960s and 70s is low," adding, "From the second half of the year, the rise in commodity prices will slow down, easing inflationary pressures." On the other hand, Kim Seongno, a researcher at BNK Investment & Securities, cautioned, "It cannot be ruled out that future consumer price increases may not be due to base effects, a point that could be highlighted at the next Federal Open Market Committee meeting."

Will foreigners come back?

Next month, the return of foreign investors is also expected following the completion of adjustments to the MSCI Emerging Markets Index. This month, institutions that finished adjusting their stock allocations joined in net buying, while individuals have driven the index rise. An Jincheol, a researcher at Korea Asset Investment Securities, said, "The return of foreigners will provide an opportunity for a shift in rotation trading momentum," adding, "Although other conditions must align, when momentum shifts to large-cap stocks, a ‘summer rally’ will occur." This year’s rotation trading started with large-cap stocks at the beginning of the year, moved to mid-caps and small-caps, and this month shifted back to mid-caps. Shin Seungjin, a researcher at Samsung Securities, also stated, "Considering the expansion of profit momentum in our industries, a re-rally in large-cap stocks can be expected," and added, "We maintain a portfolio focused on large-caps, eco-friendly, and cyclical stocks."

Hana Financial Investment evaluated the recent inflation trend as positive, noting that from the second half of the year, demand-driven growth is likely to push prices up. In the short term, attention is expected to shift to sectors with high sales growth expectations among consumer-related stocks, and after the third quarter, to sectors with higher investment growth rates than sales. An Jaeman, a researcher at Hana Financial Investment, said, "The sector with the largest expected investment profit this year is semiconductors, and the sector with the highest ratio of investment profit to operating profit is software," adding, "Sectors with high expected investment profit growth include holding companies, capital goods, healthcare, and construction, and their price-to-earnings ratios are expected to rise."

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