May Stock Market Outlook by 5 Major Securities Firms: "Stay in May"

Sell in May?.. Stay in May
KOSPI Expected at 2580~2800 in May

[Asia Economy Reporter Hwang Junho] "Buy in November, sell in May (Sell in May)"

Regarding the long-standing Wall Street adage, research center heads from five domestic securities firms offered the opinion that "staying in the market in May (Stay in May)" is beneficial this year. Despite the correction phase that began early this year, individual investors who have been steadily accumulating stocks are expected to wait for a time to realize profits rather than cutting losses.

On the 26th, the estimated range for the KOSPI index fluctuation next month, as projected by research centers at Mirae Asset Securities, Korea Investment & Securities, NH Investment & Securities, Hana Financial Investment, and Daishin Securities, is narrowed down to between 2580 and 2850. Following the KOSPI hitting its lowest point in 29 trading days (since March 15) on the 25th, the market is expected to remain challenging next month. However, there is also analysis suggesting the possibility of an opportunity to surpass the 2800 mark, which has not been breached since January.

◆Sustainability of the 'Big Step' is Key

[Image source=Yonhap News]

The biggest event in the market next month is the Federal Open Market Committee (FOMC) meeting. A 0.5 percentage point rate hike (Big Step) is considered a foregone conclusion, and there is even talk of a Giant Step (0.75 percentage point hike). However, the securities industry is focusing more on the sustainability of tightening rather than the magnitude. Hwang Seung-taek, head of the research center at Hana Financial Investment, said, "The movement of interest rates and the won/dollar exchange rate after the FOMC will be important," adding, "Especially, the movement will differ depending on whether the Federal Reserve (Fed) continues to maintain Big Steps after the hike."

Oh Tae-dong, head of the research center at NH Investment & Securities, stated, "The current U.S. 10-year yield (2.8%) corresponds to the upper trend line of the U.S. 10-year Treasury yield (log chart) starting from 1981. If it surpasses 3% and settles above the long-term trend line, revisions will be needed not only for stocks but for all asset-related forecasts." He added, "Considering the decline in growth rate and increased concerns about a hard landing, the U.S. long-term yield is expected to stabilize downward after passing the peak in the second quarter."

◆New Government and Earnings Expectations

Amid strengthening external tightening tensions, South Korea will see the inauguration of President-elect Yoon Suk-yeol's new government next month. Yoo Jong-woo, head of the research division at Korea Investment & Securities, predicted, "Uncertainties about the Fed and the economic stimulus measures from the new government will offset each other, and stock price trends will vary depending on corporate earnings, leading to a consolidation phase." While earnings are important, selective approaches based on corporate financial strength are necessary. Given the challenging corporate financing environment, non-operating expenses may potentially increase. Yoo suggested, "Companies meeting debt ratio and interest coverage ratio criteria should be classified as investment targets."

Seo Sang-young, head of the media content division at Mirae Asset Securities, also forecasted, "There will be a relief rally," noting, "Tightening issues have already been priced into the market, and China's easing of city lockdowns and economic stimulus measures could provide room for a market rebound." He added, "It would be beneficial to gauge the timing of selling based on the economic recession debate expected in the second half of this year."

Jung Yeon-woo, head of the research center at Daishin Securities, said, "Statistically, 'Sell in May' might be correct," pointing out, "Since 2010, the probability of KOSPI rising in May is 36.4%, the lowest among 12 months, and the average return is -1.18%, the lowest since August." However, he explained, "Considering the likelihood of inflation peaking next month, easing economic anxiety, and the leading economic index bottoming out, despite unstable trends, an upward trajectory is highly probable."

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