[Good Morning Stock Market] "First Trading Day of the Year of the Black Tiger, KOSPI Expected to Start Slightly Lower"

Last Day of US Stock Market Fell Last Year
Foreign Investor Supply Concerns, Slight Decline Expected

January Marks Start of Q4 Earnings Season
"Focus on Semiconductor and Shipping Sectors with Raised Profit Estimates"

This year, the KOSPI index made new history in the domestic stock market by surpassing the 3300 mark despite the shock of COVID-19. At the same time, the index experienced a sharp decline due to tapering (asset purchase reduction), inflation, US-China conflicts, and concerns over variant viruses. In the new year of Im In, we hope that the Korean economy will leap forward more vigorously with the bravery of the tiger. On the 22nd, the year is coming to an end in the Yeouido financial district of Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Minji Lee] On the first trading day of the new year of the Year of the Black Tiger, the domestic stock market is expected to start lower amid concerns over foreign investor flows due to the rise in the won-dollar exchange rate. However, some experts suggest paying attention to sectors with positive factors and those with rising profit estimates ahead of the upcoming Q4 earnings announcement season this month.

Sangyoung Seo, Researcher at Mirae Asset Securities: “Concerns over foreign investor flows will increase volatility in the domestic stock market.”

On December 31 last year, the U.S. stock market closed lower. However, this decline was mainly due to profit-taking in large-cap stocks that had led the rally, and since no new factors emerged, the impact on the domestic stock market is expected to be limited. However, export figures fell short of market expectations (22%) with an 18.3% increase, and concerns over foreign investor flows due to the rising won-dollar exchange rate persist, so the domestic stock market is expected to start down about 0.3%.

There are also positive factors in some sectors. Last Friday, the Hong Kong stock market showed strength centered on technology stocks amid rising expectations of regulatory easing, which is positive for domestic tech stocks. Although the U.S. auto industry faces uncertainty due to semiconductor chip shortages, news that the electric vehicle industry will continue to expand and that media groups including Netflix will spend at least $115 billion on the content industry is expected to drive changes in electric vehicle and content-related stocks.

Daejun Kim, Researcher at Korea Investment & Securities: “In the Q4 earnings season, semiconductor and transportation sectors are of interest from a profit perspective.”

In January, listed companies will disclose their Q4 earnings for last year. Typically, Q4 is a period when companies handle one-time expenses at once, which can significantly impact stock prices, so it is necessary to review the figures in advance. For 265 KOSPI companies, net profit is expected to be 39.7 trillion won, which is lower than the previous quarter but is forecasted to grow 131% year-on-year.

The sectors that have seen upward revisions in profit estimates over the past month are noteworthy. Only transportation, semiconductor, apparel, chemical, software, and shipbuilding sectors have seen upward revisions, while profits in other sectors have declined, which could negatively affect their stock prices.

The sectors to watch from a profit perspective are semiconductors and transportation. Within transportation, shipping is the focus. Semiconductors have maintained an upward trend thanks to upward profit revisions, and the rebound in spot prices of their main product, DRAM, has been a positive factor. Expectations are rising that semiconductor demand will recover, profits will increase, and the industry outlook will improve, which is expected to be favorable for semiconductor-related stocks.

Although shipping is undergoing a correction, it is expected to rebound later. The Shanghai Containerized Freight Index (SCFI) is at an all-time high, raising expectations for increased future earnings. The recent decline in the Baltic Dry Index (BDI) may be somewhat burdensome, but the outlook for the shipping industry to maintain a favorable trend for the time being remains strong.

Jungho Shin, Researcher at eBest Investment & Securities: “Although semiconductors are entering a spring, it should be noted that they may be sidelined during economic expansion phases.”

The strong rise in the semiconductor sector over the past two months has acted like a refreshing rain for the domestic stock market. Expectations are growing that semiconductors will play a leading role again, exerting upward pressure on the index. With semiconductors rising, there are forecasts that the domestic economy and market will now improve. However, it is difficult to expect this situation to continue indefinitely.

In the domestic stock market, semiconductor stocks serve as defensive and leading stocks from the economic peak to the recovery phase. Comparing the global leading economic index with the semiconductor weighting in the domestic stock market, Korea’s semiconductor weighting shows the strongest upward trend during the period when the OECD global leading economic index peaks and then declines and recovers from the bottom. During global economic expansion phases, the weighting tends to shrink. For managers pursuing relative returns, it is necessary to increase semiconductor weighting when the global economy passes its peak and reduce it when the economy is clearly rising.

Nevertheless, semiconductor stocks still hold appeal. Risks such as memory price declines and the first quarter’s seasonal slowdown remain downside pressures, along with tight supply-demand issues in the U.S. Particularly, the IT sector’s growth potential has been highlighted as the won-dollar exchange rate benefits and easing upward pressure on interest rates occur when the economy faces downward pressure. Since 2011, after the global economic peak and the semiconductor weighting bottom period, the semiconductor sector’s returns have risen by an average of 23% over one year since November last year.

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