After Samsung's Earnings Fireworks, "Will KOSPI Trend Change... Fundamentals Will Become More Prominent"

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[Asia Economy Reporter Lee Seon-ae] As Samsung Electronics fired the salute of its highest quarterly earnings ever, attention is focused on whether this will change the flow of the stock market. If Samsung Electronics, the market cap leader of the KOSPI, achieves record-breaking earnings, it is expected that this will lead to improved investment sentiment across the semiconductor and IT sectors, which could have a somewhat positive impact on the market. However, the prevailing view is that the market will not completely break out of the box range until uncertainties in the financial market are resolved. With the earnings season in full swing in April, the market is expected to respond more sensitively to fundamentals.

According to FnGuide, a financial information company, the consensus operating profit forecast for the first quarter of this year for 183 listed companies (KOSPI + KOSDAQ) with earnings forecasts from three or more securities firms is 49.5793 trillion KRW. This is a 3.7% increase compared to the same period last year (47.8186 trillion KRW). Compared to early last month, when Russia's invasion of Ukraine intensified, the forecast has been revised upward by 1.2%. However, this is based on data before Samsung Electronics' earnings announcement. Since Samsung Electronics announced earnings exceeding market consensus on the day, the earnings forecasts for listed companies are expected to be further revised upward.

Yeom Dong-chan, a researcher at Korea Investment & Securities, said, "Domestic companies' earnings tend to be weak in the fourth quarter and positive in the first quarter because costs and losses are reflected in the last quarter of the fiscal year, and earnings expectations are adjusted downward before entering the first quarter earnings period." He added, "There is no need to worry much about domestic companies' first-quarter earnings this year, and the market trend could change after Samsung Electronics' earnings announcement."

Regarding this year's earnings, concerns about costs due to global supply chain issues, the Federal Reserve's interest rate hikes, and potential increases in labor costs have led to downward revisions since the second half of last year, but earnings forecasts have slightly improved since March. Currently, the operating profit of companies within the KOSPI 200 is 237 trillion KRW, and net profit is 170 trillion KRW. Excluding Naver's asset valuation gain of 15 trillion KRW, net profit is also on an upward trend similar to operating profit.

Researcher Yeom forecasted, "Considering the recent rebound in IT sector profits, the market's tone could change after Samsung Electronics' earnings announcement." He continued, "In the past, when Samsung Electronics' earnings exceeded expectations, the stock's return on the announcement day showed a different direction from the earnings, but the one-week and one-month returns responded positively. Therefore, if Samsung Electronics announces positive earnings, it could lead to improved investment sentiment across the entire IT sector."

NH Investment & Securities raised the KOSPI net profit forecast for the first quarter by 2.7% compared to one month ago and predicted an upward trend in the stock market.

Sectoral differentiation is expected to become more distinct. Choi Yoo-jun, a researcher at Shinhan Financial Investment, said, "Due to the sharp rise in oil prices, the operating profit forecast for the energy sector has increased, offsetting the downward revisions in sectors such as steel and chemicals." He cautioned, "As analysts release additional forecasts, some manufacturing sectors' operating profits may be further revised downward due to increased cost burdens, so this needs to be monitored."

In fact, the operating profit forecast for the oil and gas sector (3.4207 trillion KRW) jumped 27.5% compared to one month ago (2.6833 trillion KRW), ranking first among 46 sectors. This was due to soaring oil prices, which led to a sharp increase in crude oil inventory valuation gains for refiners, and refining margins rising to the highest level since 2000. On the other hand, some sectors were hit hard by rising raw material prices and worsening supply chains. Operating profit forecasts for the auto parts (-1.7%) and display & parts (-2.8%) sectors were all revised downward in the past month. Securities (-5%), department stores (-1.2%), and construction (-0.9%) sectors also saw downward revisions in earnings forecasts over the past month.

However, despite nearly 50 trillion KRW in operating profits for listed companies in the first quarter, most experts believe it will be difficult to change the sluggish stock market trend. Lee Kyung-min, head of investment strategy at Daishin Securities, said, "The improvement is largely due to short-term gains in refining stocks rather than overall earnings strength." He added, "If earnings fall short of securities firms' consensus, the KOSPI could be adjusted below the 2700 level."

Kim Hak-gyun, head of the research center at Shin Young Securities, also said, "Some manufacturing sectors may further revise operating profits downward due to raw material price burdens," and added, "The box range market may continue for the time being until uncertainties in the financial market, such as the US tightening stance, are resolved." Kim Hyung-ryeol, head of the research center at Kyobo Securities, said, "After the first-quarter earnings announcement season, evaluations of earnings and fundamentals will have a more direct impact on stock returns."

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