It is forecast that the KOSPI will surpass its all-time high of 9,300 before year-end. This is because the KOSPI has fallen too much despite economic indicators and corporate earnings trending upward. Currently, the KOSPI index trades at a price-to-earnings (PER) ratio below five times.
In an interview with MoneyToday's specialized stock YouTube channel 'Bukkumi - Ants Dreaming of Becoming Rich', Lee Kyung-min, Head of FICC Research at Daishin Securities, stated, "The likelihood of a downward trend emerging from now on is extremely low," and added, "We should prepare with the possibility of reaching the all-time high of 9,300 in mind."
※You can view the full interview video on the YouTube channel 'Bukkumi - Ants Dreaming of Becoming Rich'.
Q. The KOSPI fell more than 22% last July and continues to show volatility this month. What is the reason?
▶First, we believe there must be aftershocks from last month's decline. Afterward, both the KOSPI and the U.S. were in a psychologically risk-on state at their peak when interest rate variables emerged. This unsettled market sentiment, triggering strong profit-taking. Previously, whenever the market wavered, retail investors or ETFs (exchange-traded funds) would step in with buying orders. However, recently, every rebound has been met with selling by retail investors, leaving supply-demand conditions somewhat fragile. Foreign investors had to be brought in to support demand. Yet, interest rate volatility also shook foreign trading activity, widening the decline.
Q. Due to the Middle East war, concerns about U.S. interest rate hikes keep arising. How do you expect this to unfold?
▶We see almost no possibility of an interest rate hike within this year. Looking back at whether conditions are suitable for a rate hike, the U.S. employment data released earlier this month deteriorated. The CPI (consumer price index) also slowed for two consecutive months. However, with international oil prices currently high, there is significant fear that rates could still be raised. Former U.S. President Donald Trump's variable continues to shake interest rate expectations. Therefore, if the U.S. and Iran show signs of entering a peace mode, we believe interest rates may stabilize.
Q. Another variable is the vicious cycle of supply-demand deterioration. Foreign investors continuously sold Korean stocks in net terms during the first half of this year. What do you expect to happen next?
▶It is true that supply-demand conditions have become fragile. Just last June, retail investors showed a trading pattern of buying stocks when the market corrected and selling on rebounds. However, after the KOSPI broke below 7,500, both retail investors and financial investment firms (ETF buyers) stopped purchasing. As prices fell into the 6,000 range, they began selling. Psychologically, we believe the KOSPI needs to reach the 7,000–8,000 range before retail ETF demand stabilizes. The key factor is foreign investors. Foreigners stopped selling once the won/dollar exchange rate peaked and started declining. Their large-scale net sales in the first half of this year were due to rebalancing. During the first half, the KOSPI alone rose more than 120% from its low point. For global portfolio managers and fund managers, the KOSPI's weight became too high. In that context, as the KOSPI sharply declined, it normalized from an excessively elevated level. Additionally, we believe concerns over AI (artificial intelligence) and semiconductors have somewhat subsided. Especially in the second week of this month, CoreWeave's stock trend and SanDisk's contract-related news helped calm anxieties. The issue remains interest rates; if they stabilize, we expect the market to recover quickly. We anticipate the market will show stability as next month progresses. At the same time, we hope the KOSPI will also display an upward trajectory from a valuation perspective.
Q. Why do you believe concerns over AI profitability have eased?
▶Concerns about AI profitability would inevitably weaken if interest rates remain high. Therefore, we consider it a potential risk that must always be kept in mind. However, we do not think the likelihood of an immediate drop in AI profitability is currently high. While some companies report negative cash flows and lack of funds, expectations for profitable firms still remain. If we examine the balance of power between these two factors, we believe expectations for profitability still carry more weight. Especially in the case of the KOSPI, which is extremely undervalued, with semiconductor valuations swinging as low as four times earnings, it remains in a deeply undervalued zone. Moreover, big tech companies continue to invest heavily in AI CAPEX (capital expenditure).
Q. The domestic stock market has fallen from 9,000 to the 6,000 range. Can the KOSPI reach 9,000 again for the remainder of this year?
▶We believe breaking through the all-time high of 9,300 is entirely possible. As of the closing price on the 19th, the KOSPI had fallen 38% from its peak. Historically, there has never been a single instance where the stock market dropped more than 30% while leading economic indicators and earnings forecasts were trending upward. This is extremely unusual. As a result, the PER (price-to-earnings ratio) is below five times — the first time since 2000. In simple terms, even if earnings were cut in half, the PER would still not reach ten times, indicating how cheap it is. While economic activity and corporate performance are trending upward, stock prices have plummeted sharply, creating a wide gap. This gap must eventually narrow. Earnings forecasts continue to show a robust trend. Therefore, we do not see a downward trend in the stock market. A sufficient correction has already occurred. Thus, if the KOSPI reaches its all-time high and economic activity and earnings rise further, there will be room for additional gains. Even if the market corrects after surpassing the all-time high due to a downturn in economic activity and earnings, we reiterate that the likelihood of a downward trend emerging from now on is extremely low. We must prepare with the possibility of reaching the all-time high of 9,300 in mind.
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