[Market ING] KOSPI Recovers 5,800 Mark: Will Valuation Normalization Accelerate?

The KOSPI has rebounded above the 5,800 mark. Ceasefire negotiations between the United States and Iran, along with Samsung Electronics' earnings surprise, served as key drivers for the market's rise. With war risks easing, attention is focused on whether the normalization of KOSPI valuations will accelerate.

Yonhap News Agency

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Last week, the KOSPI rose by 8.96%, while the KOSDAQ climbed by 2.81%. Jaewon Lee, a researcher at Yuanta Securities, stated, "Last week, the domestic stock market rebounded by reflecting expectations for ceasefire negotiations between the United States and Iran, as well as the earnings surprise from Samsung Electronics. However, due to ongoing uncertainties in the negotiations, volatility is likely to persist. Although foreign investors have turned to net buying, the inflow is not strong enough to be considered a clear directional move. Ultimately, the market is likely to remain in a preparatory phase, waiting for a resolution to geopolitical conflicts."

Samsung Electronics kicked off this year's first-quarter earnings season on a positive note, and as U.S. financial companies also begin releasing their results this week, market attention is expected to shift increasingly toward earnings. Kyungmin Lee, a researcher at Daishin Securities, commented, "The easing of geopolitical risks and the momentum of the first-quarter earnings season are driving forces for the normalization of KOSPI valuations. With foreigners turning to net buying in both the spot and futures markets, and increased purchases from financial investment firms, the resulting supply-demand momentum is expected to lead to a strong rebound and further gains for the KOSPI."

There are predictions that the KOSPI will recover rapidly as war risks ease. Giryang Park, a researcher at Samsung Securities, said, "The Korean stock market is expected to return to a bull market by narrowing the gap between price and value (earnings). Following the announcement of Samsung Electronics' first-quarter earnings surprise, earnings estimates for the KOSPI have been revised upward rapidly, and the KOSPI's 12-month forward price-to-earnings ratio (PER) stands at 8.1 times, one of the lowest levels globally. Therefore, rather than leaving the market due to external variables, it would be effective to focus on undervalued fundamentals."

Junghwan Na, a researcher at NH Investment & Securities, noted, "After Samsung Electronics' earnings surprise, forecasts for KOSPI's 2026 net profit are being revised upward, while the 12-month forward PER remains low. Regardless of war-related variables, improved earnings trends and valuation attractiveness are coming to the forefront, and if war risks decrease, the pace of recovery in risk asset preference is likely to be rapid." NH Investment & Securities presented this week's expected KOSPI band as being between 5,400 and 6,200.

There are concerns that this week's confirmation hearing for Kevin Warsh, the nominee for Chair of the U.S. Federal Reserve, could trigger market volatility. Na added, "The confirmation hearing for Kevin Warsh, the next Fed chair nominee, is scheduled for the 16th and requires approval from the Senate Banking Committee (13 Republicans, 11 Democrats). If Warsh makes principled remarks at the hearing, the market may interpret them as hawkish. This could heighten caution regarding policy uncertainty and the interest rate path, potentially acting as a factor for increased market volatility in the short term."

Researcher Kyungmin Lee also commented, "In the market, expectations for a dovish stance supporting rate cuts coexist with concerns about a hawkish stance regarding quantitative tightening. The legal indictment controversy surrounding current Chair Jerome Powell and issues regarding the Fed's independence could further amplify noise in Kevin Warsh's confirmation process. Additionally, signs of defection among some Republican members of the Senate Banking Committee could significantly increase uncertainty in the confirmation process."

Key events scheduled for this week include South Korea's export data for April 1-10 on the 13th, the U.S. March Producer Price Index (PPI) and China's March trade data on the 14th, and the U.S. April New York Federal Reserve manufacturing index on the 15th. On the 16th, the U.S. March industrial production, as well as China's March retail sales, industrial production, and fixed asset investment, are set to be released.

In addition, the United States will see earnings releases from Goldman Sachs on the 13th, JP Morgan and Citi on the 14th, ASML and Bank of America on the 15th, and TSMC and Netflix on the 16th, marking the start of the first-quarter earnings season.

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