Rioning Stock Rebound Hopes 'Subtle'... Which Stocks Are Backed by Earnings?

[Asia Economy Reporter Ji Yeon-jin] Since the beginning of this month, the domestic stock market has shown a sideways trend due to the geopolitical risks between Russia and Ukraine. It is expected that if no additional military risks emerge, the possibility of foreign buying will be high. As the end of the global COVID-19 pandemic is anticipated, it is advised to focus on reopening-related stocks.

According to the financial investment industry on the 19th, the geopolitical tension in Ukraine remains a variable that influences the direction of the domestic stock market. However, speculative net long positions on international crude oil (WTI), including hedge funds, have continued to decline since the end of last month, and China's producer price index (PPI) last month fell short of market expectations, lowering the likelihood that the U.S. Federal Reserve (Fed) will raise the benchmark interest rate by 50 basis points next month. The Fed minutes released on the 16th mentioned inflation 73 times, but the market's reaction was evaluated as neutral.

Lee Jae-sun, a researcher at Hana Financial Investment, said, "The keyword to watch next week is ‘reopening’," adding, "With the CEO of Moderna, a COVID-19 vaccine developer, mentioning the possibility of the pandemic ending, and the potential easing of indoor mask-wearing guidelines in the U.S. gaining attention, expectations for a rebound in related industries are rising again."

So far, the reopening theme has had a relatively limited upside due to the variable endemic transition policies, so current stock prices are not at a burdensome level. The price gap between export and domestic stocks has been gradually narrowing since January last year but remains the largest gap since 2011. The market capitalization difference with export stocks is also the highest since the pandemic. The market capitalization share of the reopening theme in the KOSPI is 43%, which is lower than the 10-year average.

However, for the entire reopening sector to lead to a trend reversal through rotational trading, expanding profit influence is important, but a clear upward trend in operating profit for this year has not yet been observed. The researcher said, "This is a phase that requires selective approaches within the theme," adding, "Among sectors where domestic consumption expectations and profit improvements are becoming visible, the related sectors with upward revisions in operating profit since February this year are concentrated in transportation and IT (semiconductors, hardware)."

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