Stagnant KOSPI... Institutions Should Find Earnings Stocks to Buy

[Asia Economy Reporter Ji Yeon-jin] As the KOSPI index, which plunged sharply earlier this year, continues to stagnate around the 2700 level, stocks with strong earnings that institutional investors have heavily sold have emerged as investment ideas.

According to the financial investment industry on the 13th, the operating profit of KOSPI-listed companies in the first quarter of this year is estimated to be around 60 trillion won, expected to increase by only 6% compared to the same period last year. The quarterly profit growth rate has sharply declined since the first quarter of last year (120% year-on-year), and the second quarter of this year is also expected to be only 5%. Historically, KOSPI operating profit estimates have been inversely proportional to raw material prices, and if there is no further surge in raw material prices, the cost burden's negative impact on earnings estimates is expected to be limited. Even in a bear market, stocks with improved earnings have outperformed the index, indicating that an investment strategy focused on earnings is effective.

The top sectors contributing to upward earnings revisions in the first quarter of this year were energy (refining), airlines, building materials, non-life insurance, machinery, food and beverages, and technology hardware, in that order. Conversely, sectors such as life insurance, cosmetics, furniture, construction, display, securities, auto parts, textiles/apparel, electrical equipment, pharmaceuticals/biotech, chemicals, and distribution have seen downward earnings revisions. Banks and non-ferrous metals are expected to see sharp earnings improvements in the second quarter of this year.

In particular, Hana Financial Investment analyzed the stock price outlook of stocks whose prices rose due to institutional demand and those whose prices rose despite institutional selling. The group of stocks that rose despite institutional selling showed much better performance than those driven up by institutional demand. Stocks with improved earnings in the first and second quarters of this year and heavy institutional selling included Samsung SDS, HD Hyundai, Mando, Hansol Paper, Kumho Construction, S-Oil, and Wysiwyg Studios.

Researcher Lee Kyung-soo of Hana Financial Investment advised, "Even if the stock price has already risen, if the degree of contribution from institutional demand was low, there is an implication that further increases are possible. On the other hand, caution is needed for stocks whose prices were driven up mainly by institutional demand, even if their earnings are good."

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