Will KOSPI 3000, missed this year, be achievable next year?

Securities Firms Recently Release Next Year's Stock Market Outlooks
Many Firms Predict KOSPI Upper Band Above 3000 for Next Year
KOSPI Trajectory Forecasts Diverge
Leading Stocks Expected: Pharmaceuticals & Bio in H1, Semiconductors in H2

The KOSPI closed October down to the 2550 level. With the KOSPI struggling to hold the 2600 mark, it seems unlikely to reach the 3000 level within the remaining two months of this year. However, the outlook for next year is positive. Several securities firms have projected the upper range of the KOSPI band for next year to be above 3000.

According to the financial investment industry on the 1st, securities firms have recently been releasing their stock market forecasts for next year. Kiwoom Securities projected the KOSPI band for next year to be between 2400 and 3000. Meritz Securities forecasted 2600 to 3050, Shinhan Investment Corp. 2600 to 3100, Kyobo Securities 2300 to 3000, SK Securities 2416 to 3206, Korea Investment & Securities 2300 to 2800, and DB Financial Investment 2100 to 2800.

The expected trajectory of the KOSPI is generally anticipated to show a "low start and high finish" pattern. Han Ji-young, a researcher at Kiwoom Securities, stated, "In the first half of the year, a box range movement is expected due to a slowdown in profit momentum in key sectors such as semiconductors, but in the second half, liquidity effects and improvements in profit momentum driven by G2 (the US and China) economic momentum will strengthen the stock market's upward momentum." Kim Dae-jun, a researcher at Korea Investment & Securities, said, "The KOSPI trajectory for next year is expected to decline in the first half and rise in the second half," adding, "This is a different pattern from this year. Policy risks will arise in the first half of next year. Regardless of the party, the policies pursued by the 47th US president will offset the effects of interest rate cuts. The elevated market interest rates will burden the stock market." The resumption of short selling is also a burden. Kim noted, "The resumption of short selling is in sight after March next year," calling it "a disadvantageous factor in terms of supply and demand." He forecasted that in the second half, the investment environment will improve due to low interest rate effects following rate cuts.

There is also a forecast that the stock market, which has fallen sharply so far, will show a recovery trend but experience volatility in the second half. Lee Jin-woo, a researcher at Meritz Securities, said, "The KOSPI is expected to undergo an autonomous recovery after the sharp drop until the end of the year, followed by volatility depending on the US presidential election results," adding, "In the first half of next year, relief will expand due to the new president's policy goals, and growth in the artificial intelligence (AI) value chain will continue, showing signs of recovery. In the second half, US policy drives will begin, and controversies over AI growth slowdown will expand, causing volatility."

The market leaders next year are expected to be pharmaceuticals and bio in the first half, and semiconductors in the second half. One researcher explained, "Next year, it will be more challenging to select the leading stocks that will drive the market. Leading stocks are born from a harmony of story, performance, and supply-demand, but it seems difficult for all major domestic leading sectors such as semiconductors, bio, and secondary batteries to meet these three conditions throughout the year." He added, "This suggests that the change of leading stocks next year may occur not on an annual basis but quarterly or semi-annually, coinciding with narrative changes. Since the first half is a growth stock narrative phase, bio and secondary batteries are expected to have an advantage, and in the second half, as the market transitions to a performance and quality narrative phase, increasing the weighting of semiconductors would be appropriate."

Hwang Ji-woo, a researcher at SK Securities, analyzed, "Until recently, the sectors that played leading roles in the domestic stock market were mainly semiconductors, secondary batteries, and pharmaceuticals/bio. Unless there are major variables, the leading sectors in the future are likely to be decided among these. However, based on recent stock price trends, it has been difficult to observe all three sectors outperforming the KOSPI." He continued, "Semiconductors have strong AI demand, but it will take some time for concerns about inventory adjustments and legacy business conditions to dissipate. Pharmaceuticals/bio, which have defensive characteristics and respond favorably to interest rate declines, are more likely to continue outperforming relatively." He added, "As we move toward the second half, if a rebound in legacy business conditions becomes visible, the leading sector is likely to shift to semiconductors. Considering the uniqueness of the current cycle, which features high profit defense and conservative production capacity operation, the timing of the leading stock change may be brought forward compared to the past."

Since the profit growth rate is expected to slow down next year compared to this year, sector selection is likely to be important. Kim said, "The KOSPI net profit forecast for next year is 229 trillion won, with the combined net profit of Samsung Electronics and SK Hynix increasing by 35% year-on-year to 68 trillion won. Meanwhile, net profit excluding semiconductors is expected to increase by 19% year-on-year to 161 trillion won," adding, "From these two perspectives, the profit level will exceed that of 2024, but the growth rate is slowing, so profit momentum will not be strong." He continued, "Since this directly affects expected returns, sector selection becomes important when profit growth slows. For now, semiconductor profit growth is insufficient, industrials are of interest, and energy and materials are to be avoided."