This Week's Stock Market: "From Headwinds to Tailwinds"

Due to the impact of Typhoon Maysak, which is the 9th typhoon, rain and wind swept through Yeouido, Seoul on the 3rd, and commuters hurried on their way to work. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Junho Hwang] As the uncertainties that weighed down the stock market have been resolved, an earnings-driven market is expected from this week, leading to forecasts that it is time to focus on investments centered on large-cap stocks.

Seungyoung Park, a stock strategy researcher at Hanwha Investment & Securities, analyzed, "The MSCI and KOSPI 200 index rebalancing events that have been weighing down the stock market since the 20th of last month will conclude this week," adding, "With the negative factors in supply and demand resolved, the stock market is expected to rebound."

The trigger for the rebound is expected to appear in the transition to an earnings-driven market. With the Bank of Korea raising the base interest rate and tapering (asset purchase reduction) officially announced in the U.S. within the year, expectations for liquidity have been significantly dampened. Park forecasts a high possibility of a transition from a liquidity-driven market to an earnings-driven market, similar to the period from 2013 to 2015.

However, the third quarter of this year has a higher base compared to the second quarter of last year. The operating profit growth rates of KOSPI companies are expected to decline to 118% in Q1, 87% in Q2, and 32% in Q3. The slower pace of upward revisions to operating profit consensus since last month is also a burden. Nevertheless, sectors with declining earnings, such as utilities and shipbuilding, have a relatively small market capitalization weight, so the impact on the market is expected to be limited.

Researcher Park stated, "From this week, it is necessary to gradually increase the proportion of large-cap stocks," diagnosing, "The Q3 earnings outlook for Samsung Electronics, Hyundai Motor, and POSCO is solid, and these stocks have undergone price adjustments due to mechanical selling pressure." He added, "Among KOSPI 200 stocks, only 66 companies are expected to have a larger earnings increase in Q3 compared to Q2, which will further raise market attention on these stocks."

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