US Stock Market Hits 'All-Time High'...

Lee Jaeman Hana Financial Investment Researcher
Review Next Year's Profit Estimates Before Investing

On the 4th, dealers were working in the dealing room of Hana Bank in Euljiro, Seoul. On that day, the KOSDAQ index opened at 1,012.62, up 7.62 points from the previous trading day. Photo by Moon Honam munonam@

[Asia Economy Reporter Junho Hwang] Unlike the U.S. stock market, which continues to reach all-time highs, why is the Korean stock market losing momentum?

Jaeman Lee, a researcher at Hana Financial Investment, cited on the 7th that "while the KOSPI is expected to set new all-time highs in net profit estimates for two consecutive years this year and next, next year's net profit estimates are being revised downward, unlike the U.S. S&P 500 index."

KOSPI net profits were revised down from 189 trillion won in August to 183 trillion won as of this month. KOSPI net profits are highly correlated with domestic export amounts. Although export amounts are hitting record highs, this reflects the effect of sharply rising export prices compared to last year, and the volume growth rate is actually declining. Doubts are also growing about whether export amounts can continue to break records in the future.

Considering that KOSPI's gross profit margin is expected to peak in the second quarter and then decline, the effect of corporate sales price increases has already passed its peak. Future changes in volume will be important, and this is expected to be influenced by whether the global logistics crisis (or supply disruptions) eases. The sales growth forecast for the U.S. transportation sector, which can indicate the easing of the global logistics crisis, slightly declined in September but has maintained around 32% since October.

During a period of rising interest rates, such downward revisions in profit growth rates dampen market vitality. Without liquidity supply, stock returns are determined by profit growth rates. The Federal Reserve, which sets U.S. monetary policy, announced tapering, reducing asset purchases by $15 billion monthly, and it is most likely that the base interest rate hikes will occur in September and December next year. This forms the expectation of 'tightening, but at a slow pace.'

Researcher Jaeman Lee analyzed, "From now on, when selecting stocks, next year's profit growth rate and whether profit estimates are revised upward will be important," adding, "Although stock returns have been relatively low so far this year, it is necessary to pay attention to stocks with relatively high profit growth rates next year and those whose profit estimates have recently been revised upward."

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