KOSPI's Mid- to Long-Term Uptrend Remains Valid... "Flexible Response Needed in the Short Term"

Solid Fundamentals in Earnings and Exports but Short-Term Range-Bound Outlook
“Keep Your Bat Short” Until Semiconductor-Led KOSPI Earnings Optimism Arrives

On the morning of the 27th, employees are working in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul.
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] As the global economy is recovering and South Korea's gross domestic product (GDP) growth rate and exports are still being revised upward, there is an analysis that the long-term upward trend of the KOSPI remains solid. However, since uncertainties related to the COVID-19 situation, Chinese regulations, and monetary policies of the U.S. and South Korea are linked, it is explained that flexible responses are necessary in the short term.

On the 29th, Daishin Securities made this analysis. They claim that the medium- to long-term upward trend of the KOSPI, based on domestic and international fundamental conditions, is valid and that the market is currently undervalued. Lee Kyung-min, a researcher at Daishin Securities, diagnosed, "The global economic recovery is ongoing, and next year's GDP growth rate is also being revised upward. The momentum of South Korea's export growth is solid, and export amounts continue to reach record highs." Furthermore, since corporate profits of KOSPI-listed companies are expected to grow through next year, the fundamental drivers supporting the KOSPI's upward trend remain strong. The researcher advised, "The KOSPI is currently in an undervalued phase, and from a long-term investment perspective, it is recommended to maintain a strategy of increasing the weight of existing leading stocks."

However, he added that flexibility is required in short-term outlooks and responses. He judged that a vicious cycle has formed where variables such as the resurgence of COVID-19, Chinese regulations, uncertainties in U.S. and South Korean monetary policies, semiconductor industry instability, foreign selling, and won depreciation negatively affect each other.

Therefore, the KOSPI is expected to fluctuate between 3000 and 3300 points for the time being. In particular, whether the KOSPI settles at the 3200 level next month could narrow the short-term trading range to between 3000 and 3200 points.

In such a situation, he emphasized the need for "calmness." The researcher stated, "When the KOSPI plunges sharply, as it did in the second and third weeks of this month, fear must be controlled, and when a rapid rebound occurs in a short period, like in the last week of August, excitement should be avoided. Until the trend is confirmed, buying responses are necessary when the index approaches the lower bound of the trading range and fear increases, and when it nears the upper bound and expectations rise, it means reducing exposure mainly in sectors and stocks that experienced strong short-term rebounds."

Meanwhile, to break out of the trading range and resume a medium- to long-term upward trend, two necessary conditions were presented: ▲ renewed optimism about KOSPI's performance this year centered on semiconductors, and ▲ a downward trend in the won-dollar exchange rate. The researcher advised, "Through this, the current vicious cycle can turn into a virtuous cycle. Until semiconductor and KOSPI earnings forecasts and changes in the won-dollar exchange rate are confirmed, it is important to maintain calm, keep a short grip on the bat, and focus on short-term trading."

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