"High Market Volatility in August, but No Valuation Burden on KOSPI"

On the 16th, when the won-dollar exchange rate surpassed 1,330 won for the first time in three months since May 18, dealers were working in the dealing room of Hana Bank in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Although market volatility is high every August, there is currently no valuation (price) burden on the KOSPI, according to an analysis.

Yang Hae-jung, a researcher at DS Investment & Securities, stated on the 16th, "Seasonality in the market cannot be completely ignored, and August markets usually experience high volatility," but added, "Currently, the market has adjusted to a level where valuations are supported, so there is no burden."

The Korean stock market in August is seasonally affected by vacations and uniquely coincides with the Chuseok holiday. While there is a desire to liquidate assets, buying intensity tends to weaken due to a wait-and-see attitude. Also, as the second half of the year progresses, preparations for the next year's market begin, leading to considerations about the leading stocks that have driven the market. When buying in leading stocks weakens, it can be seen as leading to market adjustments. Accordingly, Yang believes that this is related to the increased interest in growth stocks such as pharmaceuticals and bio sectors this year.

The Chinese real estate crisis is also cited as a factor influencing the adjustment. Since March, the value of the Korean won, which had shown low correlation with the Chinese yuan, has recently weakened alongside the yuan. The sharp rise in the value of the US dollar, which differs from the first half of the year, is also having an impact.

Yang said, "The China risk has been somewhat reflected mainly in sectors with significant impact, and the export ratio to China has already decreased, so the risk is lower than in the past," but noted, "it seems the market has not completely escaped its influence." Since the US, where the export ratio has increased, is relatively performing well, it is judged that this can partially offset the risk.

In this situation, the current price of the KOSPI has dropped to about 0.91 times the 12-month forward price-to-book ratio (PBR). Yang emphasized, "Compared to the period earlier this year when it fell below 0.9 times during a sharp decline, it is still at a higher level, but economic conditions and corporate profits have improved, and economic concerns have clearly eased compared to the beginning of the year. Considering this, the current level, which has fallen near a recession level, does not pose a valuation burden."

The 12-month forward price-to-earnings ratio (PER), which had risen to about 13 times in March due to rising corporate profits, has also fallen to around 11 times. He interpreted this as "meaning that the reliability of the PER has increased as the economic cycle supporting profit growth has improved."

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