Can the KOSPI index, which has risen steeply so far, set another record this week? Only 60 points remain before the KOSPI reaches the never-before-touched 4,000 mark.
Coincidentally, in the week just before that milestone, the U.S. and Chinese leaders will visit Korea together to attend the APEC (Asia-Pacific Economic Cooperation) leaders' summit in Gyeongju, and the U.S. Federal Reserve will decide the benchmark interest rate for Oct., among several key events queued up. Several U.S. big tech companies, as well as Samsung Electronics and SK hynix, which hit all-time highs, will also release third-quarter results. What investment strategy should investors set?
For now, domestic and overseas investors are expected to focus on Gyeongju in Korea. The White House officially said that President Donald Trump will visit Korea to attend the APEC leaders' summit in Gyeongju and will hold a South Korea-U.S. summit on the 29th Korea time and a U.S.-China summit on the 30th. How much progress is made in the deadlocked trade talks is likely to determine the direction of the stock market.
Many experts expect considerable negotiating results from this summit, but the problem is that such expectations have already been largely priced into the market.
The KOSPI index's 12-month forward price-earnings ratio (P/E) has risen to 11.5 times. Experts advise that the market has entered a short-term overheated zone and that risk management is needed.
In particular, attention should be paid to how discussions will proceed on the $350 billion (about 500 trillion won) investment in the United States, which has become the biggest sticking point due to the large gap in views between South Korea and the United States. Jeong Hae-chang, a researcher at Daishin Securities Co., said, "Despite expectations for a South Korea-U.S. trade deal, concerns about the $350 billion investment are increasing exchange rate volatility," and added, "Whether the won-dollar rate stabilizes lower depending on the outcome of the talks will determine foreign investor flows."
The Federal Open Market Committee (FOMC), where the Federal Reserve will set the benchmark interest rate for Oct., is also scheduled. The prevailing view is that the Fed will cut rates one more time. Fed Chair Jerome Powell said on the 14th, "As downside risks to employment have increased, the assessment of risk balance has changed." This means the Fed judges it needs to focus monetary policy on supporting a weak job market rather than defending against inflation.
More attention is likely to focus on the Fed's policy path and the timing of ending tightening. In the Fed's statement and Powell's press conference, the market needs to find clues on further rate cuts and the end of quantitative tightening (QT). If the Fed's rate cuts proceed alongside an end to QT, liquidity conditions could become more favorable for a stock market rise.
With the semiconductor sector showing strong gains, big tech earnings must also be checked to verify the basis for the increasingly heated artificial intelligence (AI) bubble narrative.
On the 29th, Microsoft, Alphabet, and Meta, and on the 30th, Amazon and Apple will release earnings in succession. The big expectation for big tech's earnings surprise stems from Intel, which has already reported results. Intel, buoyed by rising AI demand, posted third-quarter revenue of more than $13.6 billion, far exceeding the market's forecast (13.1 billion won). As a result, Intel shares surged last week, and the domestic semiconductor sector also rose sharply.
SK hynix will release results on the 29th, and Samsung Electronics on the 30th. Park Seok-hyeon, a researcher at Woori Bank, said, "If the industry outlook confirmed through the two companies' results is optimistic, the basis for share price gains could be solidified."
However, it is necessary to note that, amid recognition that the KOSPI index is overheated in the short term, foreign and institutional investors are taking profits. Although retail funds are flowing in, it is ultimately the funds of "big-hand" investors that support the lower bound of the index.
There is advice to pay attention to the shift in flows from profit-taking in leading stocks to undervalued or resting sectors on the Korea Exchange. Recently surging secondary battery stocks and shipbuilding and defense are representative. Researcher Jeong Hae-chang said, "We suggest approaching sectors that are neglected relative to fundamentals—such as consumer staples, retail and distribution, media and education, and software—from a rotational trading perspective."