Preference for Safe Assets Declined Sharply... But Is It the Right Time to Buy?

[Asia Economy Reporter Kwon Jae-hee] Although the rapid preference for safe assets has somewhat eased, it is difficult to say that the timing to buy stocks has arrived. This is because it is hard to predict the geopolitical risks that may arise in the future due to the prolonged Ukraine crisis, and the rising inflation index makes a downward cycle in global earnings growth inevitable.

Researcher Lee Kyung-soo of Hana Financial Investment stated this in a report titled "The Era of Unlimited Foreign Outflows, Focus Only on Fundamentals."

Researcher Lee analyzed, "Excessively high inflation puts pressure on corporate fundamentals. The most recently announced OECD CPI growth rate at the end of January is 7.2%. Since the commodity index has risen further between the time this indicator was announced and now, the burden on global corporate earnings will increase."

Although the recent preference for safe assets has somewhat eased, foreigners are still continuing their net selling, which proves this point.

Researcher Lee interpreted, "Foreigners are still showing a one-sided selling trend, which clearly reflects the burden on domestic fundamentals."

Nevertheless, he believes that a stock-specific market is still valid. Researcher Lee stated, "Foreign selling created index volatility, but the stocks that remained steady were those with top fundamentals. It goes without saying, but focusing on companies whose earnings are expected to improve this year is a valid strategy."

He added, "There is a high correlation between stock prices and earnings during the first-quarter earnings season. An ideal strategy is to select companies that are not sensitive to commodity prices but are expected to have high earnings."

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