[MarketING] 'Performance' as a Breakthrough in the Adjustment Phase

KOSPI Declines for 3rd Day... Retreats to 2550 Level
Upcoming Earnings Season Sparks Growing Interest in Earnings Improvement Stocks

The KOSPI and KOSDAQ continued their decline for the third consecutive day. The KOSPI fell to the 2550 level. As the market undergoes a correction, interest in second-quarter earnings is growing. During correction phases, a preference for more certain factors is reflected, so stocks with improving earnings are expected to show favorable price trends.

KOSPI Weakens for Third Day... Retreats to 2550 Level

On the 29th, the KOSPI closed at 2550.02, down 14.17 points (0.55%) from the previous day. The KOSDAQ ended the session at 861.79, down 5.18 points (0.60%). Both the KOSPI and KOSDAQ, which started the day higher, failed to maintain their gains due to selling pressure from foreigners and institutions, turning bearish.

[Image source=Yonhap News]

Foreign investors sold in the KOSDAQ market, while institutions sold in the KOSPI market, pulling the indices down. On that day, foreigners bought 31.2 billion KRW in the KOSPI market but net sold 50.4 billion KRW in the KOSDAQ market. Foreigners mostly maintained a selling bias in the KOSPI market throughout the day but turned to buying near the close. Institutions sold 180.8 billion KRW in the KOSPI market but bought 13.2 billion KRW in the KOSDAQ market. Individual investors net bought 129.3 billion KRW and 57.3 billion KRW in the two markets, respectively.

Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), made hawkish remarks about the possibility of two consecutive rate hikes within the year, causing the KRW-USD exchange rate to rise by more than 10 won, and the widening depreciation of the yuan also acted as a burden." He added, "Only some sectors reflecting earnings expectations rose, resulting in a lack of overall upward momentum in the indices." On that day, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1317.6 won, up 10.3 won from the previous day. This was the highest level since June 1 (1321.6 won) based on closing prices.

Samsung Electronics hit a 52-week high during the session, buoyed by strong Micron earnings, but its stock closed lower. Samsung Electronics ended the day at 72,400 KRW, down 0.41% from the previous day. In contrast, SK Hynix rose 1.66%. Foreign buying of Samsung Electronics continued that day, but selling pressure from institutions led to a weak stock price. Institutions were the largest sellers of Samsung Electronics with net sales of 58.6 billion KRW and the largest buyers of SK Hynix with net purchases of 51.7 billion KRW.

Upcoming Earnings Season, Focus on Stocks with Improving Earnings

As the correction phase continues, interest in second-quarter earnings is increasing with the approach of the earnings season.

Choi Yoo-jun, a researcher at Shinhan Investment Corp., said, "As the correction progresses, interest has shifted from 'words' representing expectations to 'numbers' representing actual earnings." He explained, "During correction phases, a preference for more certain factors is reflected, and stocks in industrial sectors such as automobiles, machinery, and shipbuilding, which have high earnings visibility, are showing favorable price trends."

For the market to regain upward momentum, new catalysts are needed, and earnings are expected to play that role. Cho Chang-min, a researcher at Yuanta Securities, said, "In the current trend where the stock market is taking a short-term breather, new factors are needed to regain upward momentum." He added, "The second-quarter earnings season, starting next week, is expected to fulfill that role."

The earnings season will begin with Samsung Electronics' preliminary second-quarter earnings announcement on July 7.

Researcher Cho explained, "Expectations for profits have already been confirmed, but since June, the correlation between changes in earnings forecasts and returns has increased." He said, "This means that sectors with upward revisions in forecasts tend to see stock price increases, while the opposite tends to see declines, indicating that stronger upward revisions in earnings lead to stronger stock price reactions." He added, "As of June, this phenomenon is mainly observed in sectors within industrials."

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