Is It the Peak or the Shoulder... KOSPI at Record High, What Is the Investment Strategy?

[Asia Economy Reporter Ji Yeon-jin] As the KOSPI index reached an all-time high closing price, investors' attention is focused on future investment strategies. The massive liquidity that flooded the stock market after the COVID-19 pandemic last year met the rising logic due to the recovery of economic indicators, pushing the index up once again. Experts suggest that, given the market has already priced in concerns about U.S. tapering (Tapering, tightening policies such as asset purchase reduction) and the added burden of a peak, volatility is expected in the second half of this year. They recommend refraining from increasing the proportion of leading stocks and instead focusing on small- and mid-cap value stocks.

According to the financial investment industry on the 8th, global liquidity reached $99.2 trillion last month, with an average monthly supply of $1.25 trillion since the COVID-19 pandemic, fueling asset markets and inflation bets. Even applying the current level of liquidity increments, the liquidity growth rate is expected to decline by the end of this year, and especially at the beginning of next year, liquidity increments are projected to decrease due to tapering. In the market, concerns are rising about the burden of recently elevated corporate valuations and the weakening of further economic improvements. Due to asset prices and inflation, anxiety about the liquidity reduction phase is expected to grow increasingly in the latter half of the year.

Ebest Investment & Securities analyzed the KOSPI price trends after liquidity growth rate slowdown since 2007 and found that in four cases, after the liquidity growth rate declined, the market rebounded and then sharply dropped, which was more frequent than sideways movement followed by trend rises (2 cases). However, past indicators also showed opportunities for rebounds, and after six months of price sideways movement, the market entered an upward phase. Researcher Shin Joon-ho of Ebest Investment & Securities said, "The applicable investment idea at this point is to respond with a quality-focused approach without further expanding the proportion of leading stocks rather than spreading risk assets." He particularly noted that for leading stocks, the peak tends to lag behind the market peak, so if the current rise is not over, maintaining the weight is advised, and undervalued automobile stocks compared to global competitors were recommended. Additionally, small- and mid-cap value stocks and agricultural stocks, which are expected to see significant earnings growth in the second half, were also recommended. Researcher Shin said, "As environmental issues have emerged, carbon emission reduction issues in the agricultural sector are also being raised," adding, "The stock price of global agricultural companies (MVIS Global Agribusiness) has risen 20% since the beginning of the year (as of the end of May), outperforming the global index return (11%)."

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