Despite Volatility, KOSPI Seen Reaching 10,000 in the Third Quarter... "Earnings Are the Key to the Rally"

Despite rising market volatility, the KOSPI (Korea Composite Stock Price Index) is expected to stay on course toward the 10,000 level. Heads of securities research centers said the second-quarter earnings season, which begins in earnest this month, will be the main driver of further gains. As earnings reports roll in from Samsung Electronics, other domestic semiconductor companies, and Big Tech firms in the United States, they expect the expansion of Artificial Intelligence (AI) investment and the improvement in corporate profits to be confirmed. In that case, they said the KOSPI could surge as high as 12,000.
In a survey Financial News conducted on the 6th among heads of research centers at major domestic securities firms, forecasts for the KOSPI in the third and fourth quarters ranged from 7,290 to 12,000. Samsung Securities projected 8,000 to 12,000, Daishin Securities forecast 7,500 to 11,500 for the second half, and NH Investment & Securities set a year-end target of 11,000, pushing the upper end above 10,000. Shinhan Investment Corp. and Meritz Securities forecast 7,300 to 9,900 and 7,290 to 9,500, respectively. ▶Related article on page 4
After reaching the 9,000 mark, the KOSPI fell back to the 7,000 range last week for the first time in 15 trading days, showing signs of correction amid heightened volatility. The research chiefs agreed that if companies confirm improved earnings in this earnings season, the recent correction in semiconductor stocks will likely amount to only a temporary slowdown. Yoon Chang-yong, head of research at Shinhan Investment Corp., said, "The key variable is whether earnings revisions resume during the July-August earnings season," adding, "Progress in Samsung Electronics' high-bandwidth memory (HBM) business and stable interest rates could act as positive factors."
Some analysts also said the KOSPI's upside potential should be viewed from both earnings expectations and valuation. If earnings estimates are revised upward, they expect the burden of the current index level to ease as well. Yang Ji-hwan, head of research at Daishin Securities, said, "The 12-month forward earnings per share (EPS) rose from 666.6 points at the end of March to 1,098.8 points on June 29, and the 12-month forward price-earnings ratio (PER) remains at 7.64 times, still in a deep value zone," adding, "A normalization in valuation alone could lift the index higher."
However, the research heads also cautioned that volatility could increase due to external factors, regardless of earnings improvement. Seokmo Yoon, head of research at Samsung Securities, said, "The drivers of stock gains are easing global inflationary pressure through stable oil prices and a re-rating of valuations in the South Korean stock market," but added, "Policy uncertainty ahead of the United States midterm elections in November could also become a trigger for a correction."
koreanbae@fnnews.com Reporter Baek Han-geul Reporter