Korea Investment & Securities Raises 1-Month KOSPI Forecast to 3,750

On October 16, Korea Investment & Securities announced that it is raising its upper forecast for the KOSPI over the next month from 3,500 to 3,750.

Kim Daejun, a researcher at Korea Investment & Securities, stated in a report released on this day, "The KOSPI, which surged due to large-scale net purchases by foreigners before the holiday, is expected to continue its upward trend based on valuation recovery and improved earnings."

He explained, "As of October 14, the KOSPI's 12-month forward price-to-earnings ratio (PER) stands at 11 times. We set a short-term target at 11.6 times," adding, "This level is calculated by adding one standard deviation to the 10-year average of the 12-month forward PER. When converted to the KOSPI index, this corresponds to 3,750," explaining the reason for raising the upper forecast.

On the afternoon of the 15th, when the KOSPI reached an all-time high, the closing prices of the KOSPI and individual stocks were displayed on the status board at the Korea Exchange in Yeouido, Seoul. Photo by Yonhap News

He cited two main factors that could drive valuations higher. First, he pointed to the Korean government's efforts to strengthen its shareholder return policies, mentioning plans to push for a third amendment to the Commercial Act during the regular National Assembly session. Second, he cited the U.S. Federal Reserve's monetary easing policy. He added that if market interest rates, which have been under upward pressure due to quantitative tightening (QT), stabilize, stock market valuations could rise further.

He also highlighted the upward revision of earnings forecasts as a noteworthy factor. Samsung Electronics, the largest company by market capitalization on the KOSPI, reported a preliminary operating profit of 12.1 trillion won for the third quarter on October 14, surpassing expectations. He noted, "With the third-quarter earnings announcement, profit growth could accelerate further. Just as valuations are rising, earnings forecasts are also increasing, so the KOSPI could reach even higher levels than it is now."

Kim also acknowledged that there are negative factors for the market outlook, including the U.S.-China trade conflict, but stated, "Such trade uncertainties have a limited impact on the market due to working-level discussions and the lessons learned from past experiences." He noted that even recently, when President Donald Trump announced tariffs on China but then shifted to a more conciliatory stance, the market quickly responded with relief.

Regarding the higher won-dollar exchange rate, he observed, "With verbal intervention by the foreign exchange authorities and the Federal Reserve's monetary easing stance, there is room for the pace of the won's depreciation to slow. As long as the dollar-won exchange rate does not reach 1,500 won, the probability of the current bull market reversing is low."

By sector, semiconductor and materials-equipment-centered IT stocks led the way in September, while in October, non-metallics (rare earths), power (transmission and generation), and robotics themes have performed strongly. On this, Kim commented, "When broken down by month, it may seem that different sectors are moving, but except for rare earths, the other strong sectors all have artificial intelligence (AI) as a common denominator," adding, "Sectors benefiting from this momentum could become market leaders. IT is a prime example, and even if it faces temporary correction pressures, its weighting should be kept high."

He further stated, "As long as exchange rate risks can be managed, the bullish trend is unlikely to change for the time being," and added, "There is a need to take an optimistic view of the Korean stock market. Investors are already responding with active trading. This is just part of the journey toward the era of KOSPI 4,000."

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