KOSPI Posts Surprise Earnings in Q2... "Conservative Stock Approach" Amid Concerns of Economic Peak

[Asia Economy Reporter Ji Yeon-jin] While the net profit of KOSPI 200 stocks in the second quarter is expected to break the record high, concerns about a 'peak out' are growing.

According to the financial investment industry on the 17th, the KOSPI 200 recorded a 'surprise performance' exceeding market expectations by 51% based on operating profit in the second quarter, and net profit is expected to break the record high with 38.3 trillion KRW. This is lower than the 61% of companies with earnings surprises in the first quarter.

The financial and steel sectors led the significant earnings growth in the second quarter, while in the first quarter, the chemical, energy, steel, and financial sectors led the surprise earnings. However, in the second quarter, the chemical and energy sectors showed stagnant performance. Although the price increase trend centered on crude oil was maintained in the second quarter, resulting in some inventory valuation gains, product margins were partially damaged due to rising raw material prices.

The IT sector announced improved earnings compared to the first quarter due to favorable economic conditions such as rising semiconductor prices. On the other hand, the consumer staples and utilities sectors generally recorded earnings shocks due to increased costs from rising raw material prices. The communication sector, composed of telecommunications, internet, and gaming industries, recorded earnings shocks mainly in internet and gaming, and industrials reported poor performance in construction and shipbuilding sectors due to one-time cost increases.

Meanwhile, the KOSPI 12-month forward earnings per share (EPS) has already started to decline. It is analyzed that the new listings of overvalued stocks recently have led to an increase in the KOSPI 12-month price-to-earnings ratio (PER) and a downward adjustment of EPS.

Morgan Stanley has simultaneously lowered its investment opinion and target price for the semiconductor sector, leading to concentrated foreign selling. There are concerns that if the EPS downward adjustment for semiconductors materializes, the net profit growth rate for next year could turn negative.

Kim Sung-no, a researcher at BNK Investment & Securities, said, "The top-down momentum slowdown is expected to be determined by whether the base interest rate hike scheduled for next week occurs," adding, "Considering the stock price plunge of the IT sector, which maintains the best business conditions among Korean manufacturing industries, concerns about the ripple effects on other manufacturing sectors are bound to increase. In this context, even if a rebound occurs after a short-term sharp decline, a conservative response strategy toward the stock market will be maintained."

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