Ahead of the Chuseok holiday, the KOSPI index held steadily in the 3,400 range and maintained a relatively firm trend even near a record high. With public holidays such as the Chuseok break and Hangeul Day continuing this week, the stock market will remain closed for an extended period. After the holiday, while attention turns to domestic and overseas policy issues, a "earnings-driven market" is expected to continue for the time being.
Experts see the post-holiday market trend as being driven more by the earnings of individual corporations and the upside potential by industry than by U.S. rate policy or global economic variables. After the long Chuseok break, an aggressive strategy of buying undervalued stocks ahead of third-quarter earnings announcements is needed rather than a defensive investment strategy.
Kim Doo-eon, an analyst at Hana Securities, said, "After the holiday, the market's focus is expected to shift to corporations' earnings announcements," and emphasized, "We should review trends in the global financial market and prepare for the opening of the Korean stock market on the 10th."
Korea Investment & Securities pointed to semiconductors, displays, travel and leisure, and construction as industries with upward revisions to third-quarter operating profit estimates.
However, while semiconductors and displays show clear earnings improvement, valuations are burdened as share prices have already priced in much of the gains. The construction sector is also unlikely to see short-term momentum as investor sentiment has weakened since the announcement of the "comprehensive plan for labor safety."
By contrast, the travel and leisure sector faces strong seasonal tailwinds, with Chuseok overlapping China's Golden Week, and also has significant potential for structural benefits. The measure allowing visa-free entry for Chinese tourists that began 4th last week will continue through June next year. As a result, there is an expectation that duty-free shops, airlines, and hotels across Korea could benefit.
Park Gi-hun, an analyst at Korea Investment & Securities, said, "Multiple positive factors are converging for travel and leisure," adding, "Ultimately, the sector worth attention at this point is travel and leisure."
Liquidity conditions in the stock market are also favorable. Although a wait-and-see mood often prevails before holidays, this year transaction value remained near 1 trillion won even ahead of the holiday break. Compared with past Chuseok periods when transaction value shrank to the 800 billion to 900 billion won range, concerns about a supply-demand vacuum are not significant.
For this reason, securities firms expect the market to continue rising after the Chuseok holiday. According to Hana Securities, over the past 25 years the KOSPI index fell an average of 0.43% in the week before Chuseok, but rose 0.51% in the week immediately after. In particular, foreigners and institutions have shown net buying after the Chuseok break.
Domestic and overseas policy issues that have recently affected Korea's stock market should be watched closely after the Chuseok holiday as well. With the government maintaining its drive to revitalize the stock market, additional amendments to the Commercial Act are expected to be discussed in the National Assembly. In the United States, attention should be paid to the release of the Purchasing Managers' Index (PMI), employment indicators, and the minutes of the September FOMC.