"KOSPI Could Reach 7,300 Despite High Volatility"... NH Investment & Securities Raises Target

[Financial News] NH Investment & Securities has raised its 12‐month target for the Korea Composite Stock Price Index (KOSPI) to 7,300 points. The firm cited simultaneous growth in corporate earnings and multiple expansion as the main reasons.
On the 5th, NH Investment & Securities researcher Kim Byung-yeon stated, "Even though we are in a phase of high index volatility, we are raising our KOSPI target because the current stock market is in an expansion phase where corporate earnings growth and multiple expansion are occurring at the same time."
Kim pointed to three main drivers for the stock market rally: strong confidence in hardware demand related to artificial intelligence (AI), qualitative improvements in corporate governance, and continued trust in U.S. asset markets.
Recently, earnings have been improving across many sectors, with upgrades in the semiconductor industry standing out in particular. KOSPI net profit, which was around 250 trillion won in October last year, has been revised up to 423 trillion won based on the FnGuide consensus. This represents a sharp upward revision to earnings estimates in a short period of time.
Kim noted, "After the earnings announcements from Samsung Electronics and SK hynix, analysts’ previously conservative estimates have been replaced by actual figures, and additional earnings upgrades have continued since then," adding, "This reflects a further strengthening of conviction in AI-related hardware demand."
Following last year’s amendment to the Commercial Act of the Republic of Korea, the groundwork has been laid for improvements in corporate governance issues, and the upcoming annual general meeting season is expected to confirm this shift. Companies that embrace the legal changes, take advantage of separate taxation benefits, and raise their payout ratios to enhance shareholder value are also expected to emerge.
Kim explained, "During the March shareholders’ meeting season this year, the key question for the index level will be whether Korea’s current emerging‐market‐average levels of return on equity (ROE) and payout ratio are sustainable over the long term," adding, "This will be a crucial factor in assessing whether there is a structural change in the nature of South Korea’s financial markets."
He also said that once the U.S. bond market stabilizes, the Korean stock market is likely to gain further upward momentum. Kim commented, "We believe the nomination of Kevin Warsh as Fed chair has partially eased distrust toward the United States dollar (USD)," and added, "Even if Trump’s aggressive moves in this year’s midterm election lead to a correction in the index, his eventual shift toward actions aimed at stabilizing financial markets is likely to have a greater impact."
Kim cited several potential signals that the KOSPI may be nearing a peak: a change in conviction regarding semiconductor demand, a point at which preference for Japanese long-term government bonds rises, and a weakening of policy momentum by the Government of South Korea.
nodelay@fnnews.com Park Ji-yeon Reporter