IBK Securities said on the 11th it raised next year's KOSPI target band to 3,500–4,700 points. The previous upper bound was 4,000 points, but it reflected improved earnings at KOSPI corporations, led by the semiconductor sector.
Byun Jun-ho, a researcher at IBK Securities, said, "Although short-term volatility in the stock market has recently increased, expectations for a boom in artificial intelligence (AI) and the semiconductor cycle have strengthened, and earnings estimates for KOSPI corporations, centered on semiconductors, are being revised upward."
IBK Securities analyzed corporations within the KOSPI 200 for which a consensus (securities firm forecasts) is available and found that next year's KOSPI operating profit is expected to increase 46% from this year. That is 15 percentage points higher than the estimate in late Oct. (31%).
The upward revisions appeared mainly in the semiconductor sector. The estimate for next year's operating profit has been revised up 16% from late Oct. to now, and during the same period Samsung Electronics rose 43% and SK hynix 37%, showing large upgrades in forecasts, Byun explained.
By comparison with the end of 2023, the current KOSPI gain is around 56%, which means the market's rise is slower than the pace of earnings improvement, he said, adding, "There is a risk that next year's earnings outlook will be revised downward, but given the current economic trend, the semiconductor cycle, and the trajectory of the earnings revision ratio, that risk is unlikely to stand out through the first quarter."
He added, "There may be concerns about the sharp price gains in the market this year, but relative to the growth rate assuming further earnings improvement next year, there still appears to be room for additional upside."
For additional drivers of the KOSPI band's upside, it cited: ▲ a sharp drop in the exchange rate on the back of a strong Korea–U.S. currency swap and an expansion of aggressive net buying by foreign investors ▲ stronger shareholder-return policies by large corporations ▲ a recovery in global trade from tariff removal ▲ inflows of foreign funds following inclusion on the watch list for the MSCI Developed Markets Index in June next year ▲ continued strength in the semiconductor cycle and improved earnings credibility.