KOSPI May Retreat to '2400' in the Second Half of This Year...

Outlook for 3 Securities Firms in the Second Half
KOSPI Expected Range 2400~3000
Decline Accelerates if Combined with Recession

[Asia Economy Reporter Hwang Junho] The KOSPI, which plunged from 2988.77 (closing price on January 3) to 2550.88 on the 12th of last month, may it revive again in the second half of the year? The KOSPI, barely holding the 2600 mark, is forecasted to retreat to 2400 by the end of the year.

On the 3rd, securities firms such as KB Securities, Daishin Securities, and Hyundai Motor Securities presented an expected KOSPI fluctuation range of 2450 to 3000 for the second half of this year. Both the upper and lower limits have significantly dropped compared to last year's year-end forecast for this year (2800 to 3400). The 2400 level is already a burden, and there is even a possibility of falling to 2100. This figure considers the possibility of an economic recession. KB Securities researcher Lee Euntaek said, "In past phases of 'economic slowdown + US Federal Reserve (Fed) tightening,' declines of about 23-25% occurred, and applying this to the KOSPI results in a range of about 2450 to 2550," adding, "Even though the possibility is low, if the variable of 'economic recession' is added, it could fall at least 35% (to 2150) or more."

However, the outlook is not entirely bleak. There is also a forecast that the weak Korean won will mitigate the downside shock to profits of manufacturers such as Samsung Electronics. Hyundai Motor Securities researcher Lee Jaeseon advised, "In the past 10 years, when the KOSPI manufacturing sector's sales growth rate rose 0-5% year-on-year, the KOSPI's average annual growth rate was about 0.5%," emphasizing, "It is important to note that the KOSPI has shown a decline of about 12.6% compared to the beginning of the year."

If seeking an opportunity to exit the stock market, the third quarter of this year seems appropriate. Daishin Securities predicted that the KOSPI will draw a 'high start, low finish' curve in the second half of this year. Daishin Securities researcher Lee Kyungmin said, "In the third quarter, variables that have stimulated volatility such as inflation, bonds, and monetary policy will stabilize, supporting the 2600 level, which could lead to relief rallies and technical rebounds." However, he added, "The reality from the fourth quarter onward is not easy," forecasting, "Although the Fed hopes for sustained full employment, moderate demand slowdown, and price stability, it cannot control variables such as rising raw material prices due to the Russia-Ukraine war, economic instability from China's lockdowns, and supply bottlenecks, so the bottom may only be found in the first half of next year."

Investors seeking opportunities in this situation should pay attention to companies with excellent profit and cash generation capabilities. Researcher Lee Euntaek suggested, "'Producer price increases' and 'worsened cash flow due to inventory increases' are precursors to corporate profit declines," recommending, "Focus on industries with less concern about profit margin erosion due to inventory burdens and demand contraction, stocks with changes in quality content, stocks with altered components of return on equity (ROE), stocks with low financing cost risk, and stocks with stable cash flow."

Hana Financial Investment researcher Lee Jaeman said, "During the 2013-14 tightening, US Alphabet succeeded in business diversification through aggressive mergers and acquisitions," adding, "Domestic companies also need aggressive investment, so it is necessary to watch companies that have relatively good cash generation ability and cash but have not invested as aggressively as before." The stocks he pointed out include Samsung Electronics, POSCO Holdings, and LG Household & Health Care.

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