Optimism Rises with "June Brings an Undo Rally"

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Junho] Cautious forecasts suggest that the stock market will stage a relief rally next month. The key factors behind this outlook include the pre-reflection of inflation and countries' responses, solid corporate earnings, an undervalued stock market, and the Chinese government's willingness to stimulate the economy.

On the 30th, Lee Kyung-min, a researcher at Daishin Securities, said, "The first technical rebound target for the KOSPI next month is the 2700 level, and the relief rally target is in the high 2800s." The biggest reason is that the stock market is undervalued. As of the closing price on the 27th (2638.05), the KOSPI is down 17.66% compared to the previous year. He analyzed, "The gap between the KOSPI's major earnings and export growth rate is -36.86%, which is about 10 percentage points below the average since 2010 (-27.2%)."

Corporate earnings in the first quarter also appeared to be decent. Kim Kwang-hyun, a researcher at Yuanta Securities, explained, "Among the 16 stocks with operating profits exceeding 1 trillion won, 15 exceeded earnings forecasts, but the stock market reaction was lukewarm. It is expected that corporate value will be highlighted during the process of shifting the lead in supply and demand."

Concerns about the economic recession, which have pressured the stock market so far, include worries about the slowdown in U.S. consumption and uncertainties about the Chinese economic downturn. However, the Chinese government is now taking steps to boost consumption. Park Kwang-nam, a researcher at Mirae Asset Securities, forecasted, "Premier Li Keqiang's directive for an all-out effort to normalize the economy and the Chinese government's issuance of consumption coupons could reduce concerns about the global demand slowdown for goods."

There are also skeptical views regarding this outlook. Lee Eun-taek, a researcher at KB Securities, said, "A short-term rebound could turn into a 'rally' in the second half of the year, but it is uncertain if it will happen now. Next month, the U.S. will raise the benchmark interest rate by 50 basis points and continue quantitative tightening, and unexpected events like the 2019 repo crisis could occur." He added, "Second-quarter earnings this year are expected to be lower than the previous year, and panic selling as some claim is also possible."

Lee Jae-man, a researcher at Hana Financial Investment, advised, "In this situation, it is necessary to watch stocks with a large decline in price-to-earnings ratio, stocks whose operating profit margin increases with the rise in the won-dollar exchange rate, and stocks with a significant drop in foreign ownership."

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