[Click eStock] "KOSPI Band Maintains 2500~3000 Range"

Hanwha Investment & Securities analyzed the sharp decline in the stock market on the 6th as an oversold phase.

Seungyoung Park, a researcher at Hanwha Investment & Securities, explained, "On the 5th, the KOSPI closed at 2441.55, falling below the lower bound of this year's KOSPI band of 2500 to 3000 suggested by the investment strategy team," adding, "We judge this as oversold."

He continued, "We do not believe the KOSPI decline is entirely based on fundamentals," noting, "Concerns about a recession grew as the US July ISM Manufacturing Index and non-farm payrolls fell short of expectations." He emphasized, "We assess the possibility as low," stating, "An unemployment rate in the 4% range and inflation rate in the 2% range are conditions for disinflation, not recession," and "When the US economy fell into recession, employment decreased."

Researcher Park analyzed, "An employment increase in the hundred-thousands cannot be seen as evidence of a recession," and explained, "The adjustment occurred because expectations for the number of interest rate cuts by the end of this year changed, causing funds to move from stocks to bonds."

He explained, "As of the 2nd, the total return on US Treasury bonds this year was 3.03%, and the total return on global stocks was 9.36%," adding, "A week earlier, on the 26th, these were 0.46% and 11.60%, respectively." He further stated, "As the gap narrows, adjustment pressure is expected to ease," and "As expectations for the US economy weakened, positions in markets such as Korea, Japan, and Taiwan, where US exports were the buying rationale, were likely liquidated."

On the previous day, foreigners net sold stocks worth a total of 1.5 trillion won. Net sales of Samsung Electronics alone reached 1.2 trillion won. Researcher Park analyzed, "Although the relative attractiveness of global stocks has weakened, the domestic stock market has reached a range where valuation appeal can be asserted," noting, "The market capitalization of the KOSPI market has decreased to 1930 trillion won," and "Based on this year's expected net profit of 192.1 trillion won, the price-to-earnings ratio (PER) for this year is 10.0 times."

Researcher Park emphasized, "Calculating the average KOSPI PER since 2002 using the same criteria yields 13.6 times," and added, "Because US growth prospects have declined and interest rates have fallen, the factors for PER increase and decrease have offset each other." He stated, "The current PER would need to justify a 26.5% downward revision of this year's net profit expectations," and "Since 2002, there have been eight instances where net profit expectations in the KOSPI market were revised downward by more than 26.5%." He continued, "These were times of industrial restructuring, except during recession situations such as the financial crisis and the COVID-19 pandemic," and explained, "For this year's earnings outlook to be significantly adjusted downward in the future, restructuring would need to occur in sectors like secondary batteries and artificial intelligence (AI)."

Researcher Park analyzed, "The KOSPI band for this year remains 2500 to 3000," and "The 12-month expected PER is around 8.2 to 9.9 times." He advised, "The closing price on the 5th corresponds to a 12-month expected PER of 8.1 times," and recommended, "We advise buying domestic stocks."

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