[Real Estate Tech] Q1 KOSPI Picking Up Below 2800 VS No Bottom Catching for 2600 Undershooting

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[Asia Economy Reporter Lee Seon-ae] The "January effect" did not materialize. The market closed January not only below the seemingly strong 2800 level but also below 2700. Market attention was focused on where the "bottom" of the KOSPI band would be in the first quarter, which has entered a "major downtrend." Although there was a rebound after the Lunar New Year holiday, securities firms advise conservative investing as the domestic stock market has entered a correction phase. While some suggest a "buy-the-dip" strategy focusing on sectors with solid earnings, there are also strong voices recommending increasing cash holdings in anticipation of an "undershoot" of the first quarter bottom down to 2600.

◆ "Buy-the-dip effective" below 2800 = The general consensus in the securities industry is that levels below 2800 are oversold. Jeong Yong-taek, Chief Research Fellow at IBK Investment & Securities, said, "I see 2800 as the central bottom, and if this level breaks, one should start buying," adding, "The KOSPI has steadily declined from the 3300 level last year, and interest rates were raised earlier than in the U.S., so the domestic market has already entered a correction phase. Therefore, there is no need to lower the domestic market bottom in line with the U.S."

Lee Jin-woo, a researcher at Meritz Securities, also said, "There is a possibility of a short-term undershoot, but the stock price correction has already entered oversold territory, and the Nasdaq is also in oversold territory," adding, "It is important to see how the rebound will unfold and whether it will be sustained, and the period around the 2800 level will be when the bottom is confirmed."

Oh Tae-dong, Head of the Research Center at NH Investment & Securities, analyzed, "The domestic market is falling in tandem due to the sharp drop in the U.S. stock market last Friday," and said, "It is too early to expect a clear rebound until the correction in the U.S. stock market calms down." He added, "The domestic market has generally already undergone a correction, and levels below 2800 are considered oversold," and predicted, "It can fall further, but since it has already entered oversold territory, it will not stay below 2800 for long."

Kim Yong-gu, a researcher at Samsung Securities, emphasized, "2800 is a bottom that can be set based on fundamentals, so buying the dip is effective only for stocks with good earnings prospects."

◆ Undershoot to 2600 "Secure cash" = There is also a conservative view, meaning one should not rush to catch the bottom.

Choi Yoo-jun, a researcher at Shinhan Financial Investment, said, "Technically, the 2800 level is important, but with a buffer, it could drop to the mid-to-late 2700s," adding, "This point was the high just before the rally at the end of 2020, so after the rerating is resolved, the bottom may be formed." Choi also explained, "The Korean stock market is holding up better than the Nasdaq, and earnings are rising based on price-to-book ratio (PBR), so this may be the peak of the current price decline."

There is also a somewhat pessimistic forecast that the market could fall to the 2600 level within the first quarter. Hawkish monetary policy is putting valuation pressure on growth stocks, which could impact large domestic stocks. While abundant liquidity based on low interest rates has driven the stock market, this trend is gradually fading.

Daishin Securities projects the KOSPI bottom this year at around 2610 and expects the bottom to be reached within the first quarter. Although expectations for economic recovery are not high, monetary policy is hawkish, so increasing cash holdings until the first quarter is advised. Lee Kyung-min, a researcher at Daishin Securities, said, "Risk management needs to be strengthened in January and February this year, and if there is a rebound, it is recommended to reduce stock holdings and increase cash holdings," adding, "After the gap between the economy and monetary policy, and between investors' expectations and reality, narrows, a new start for the KOSPI will be possible."

◆ Low-price buying ‘Ultimately, earnings companies are the answer’ = The common view in the securities industry is that once the liquidity-driven market ends, earnings companies provide the answer. Attention should be paid to earnings per share (EPS) and valuation (PER).

Lee Jae-man, a researcher at Hana Financial Investment, said, "If it is difficult to expect PER increases during a period of rising interest rates, companies with high EPS growth rates should be sought," explaining, "Companies with solid actual earnings have performed well even in a down market."

According to Hana Financial Investment, companies with EPS growth rates higher than operating profit growth rates this year include Samsung Electronics, Samsung Biologics, Hyundai Motor, SK Innovation, LG Electronics, SK, Samsung Electro-Mechanics, and Doosan Bobcat. Among small and mid-cap stocks, LS, PI Advanced Materials, Korea Plant Service & Engineering (KPS), SFA, Eugene Technology, Korean Reinsurance, SFA Semiconductor, Golfzon, and NICE Information Service are expected to have EPS growth exceeding operating profit growth. Among these, SK Innovation (87.9%) and LG Electronics (86.1%) show the largest gaps between EPS growth and operating profit growth.

Considering that relatively few stocks have upward earnings revisions this year, the combination of "undervalued + large decline last year + earnings improvement" is also a reasonable strategy. Stocks meeting these criteria, according to Hana Financial Investment, include GS, LX International, Korea Financial Group, Mirae Asset Securities, Hyundai Marine & Fire Insurance, Korea Gas Corporation, Shinsegae, Industrial Bank of Korea, Samsung Securities, CJ Logistics, NH Investment & Securities, Woori Financial Group, Kumho Petrochemical, Shinhan Financial Group, Hyosung, Pan Ocean, Seoul Semiconductor, Kolmar Korea, Korean Reinsurance, Samsung C&T, E-Mart, Hana Financial Group, Hyundai Green Food, Hyundai Mobis, IS Dongseo, CJ ENM, LS, DoubleU Games, and KT.

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