S&P 500 Pauses After Record High, Kospi Lacks Strong Rebound... Now Eyes Turn to Next Year

[Asia Economy Reporter Lee Seon-ae] DB Financial Investment has a positive outlook on the stock market for next year.

On the 13th, Seol Tae-hyun, a researcher at DB Financial Investment, stated, "The Standard & Poor's (S&P) 500 index has been stagnant after reaching an all-time high, and the KOSPI has not shown a strong rebound. However, there is an expectation that next year will be better than now, although the path may differ."

As the corporate earnings announcements, which were the main driver of the S&P 500's upward trend, are coming to an end and momentum weakens, the U.S. stock market is showing a slight decline due to the U.S. CPI exceeding market expectations amid a sharp rise in energy prices. The KOSPI continues to decline except for some sectors such as IT and communication, where institutional or foreign net buying persists.

Most of the S&P 500 constituent companies have reported their third-quarter earnings, with about 82% of them recording earnings surprises. Among KOSPI companies, the proportion of firms with third-quarter earnings surprises is slightly less than half. Researcher Seol analyzed, "As the third-quarter earnings announcement season is concluding, market attention is expected to shift to 2022 earnings. Sectors with a high proportion of companies raising their operating profit forecasts for next year include insurance, energy, non-ferrous metals/wood, banking, steel, and shipbuilding."

According to securities firms' annual outlook for 2022, the average upper band for the KOSPI in 2022 is 3418, and the average lower band is 2793. Although the annual stock index trends, recommended sectors, styles, or themes vary, it is judged that there is greater upside potential compared to the current stock index. Researcher Seol emphasized, "Looking at the monthly return distribution since 2000, the period from November to January corresponds to relatively high average monthly returns. Seasonally, reflecting expectations for next year, this period could improve KOSPI investment sentiment."

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