With 2026 ahead, the market is choppy and economic indicators are hard to gauge. Paradoxically, though, the direction is becoming clearer. Investors have already begun to move on the assumption of interest rate cuts. The most important premise running through the current domestic stock market is a recovery in liquidity. Accordingly, sectors that were strong this year are still expected to do well next year.
Liquidity recovery phase, the first to move is "bio"
We have gone through liquidity-driven markets many times. In phases of liquidity recovery, growth stocks have led gains in the domestic market, and among them, bio research and development (R&D) corporations have played a leading role in the rally.
The value of bio corporations is determined by expectations for their pipelines (new drug candidates) and licensing-out (technology transfer), and the domestic bio industry is, by nature, structured around R&D, making event-driven investing inevitable. That is why, as rates fall and liquidity returns, this area gains the strongest momentum.
The KOSDAQ market itself is structured so that share prices react sensitively to various events such as technology, platforms, and clinical trials. Therefore, unlike the U.S. market led by global big pharma, in Korea, expectations for various momentum and technology transfers by small and mid-sized bio R&D corporations directly shape investor sentiment.
This is why bio stocks, despite their relatively small size, have been especially active as growth stocks in the domestic market.
Because a single technology transfer headline can send a company's market cap soaring or plunging by hundreds of billions of won, in a risk-on phase formed during a rate-cut cycle, funds flow first to R&D-focused bio corporations. In fact, trends worth noting from a domestic bio investment perspective are already visible. Over the past six months, trading value in bio-related sectors has increased ahead of information technology (IT), and U.S. bio exchange-traded funds (ETFs) have broadly strengthened—both positive signals. During periods of expanding liquidity, bio corporations have seen many tailwinds. The time in 2015 when the first mega licensing-out deals poured in, the 2019 spotlight on gene therapy-related sectors, and the 2021 focus on platform-based bio corporations all came during liquidity expansion phases like now. Next year is expected to enter a similar investment cycle.
In particular, next year is worth watching for the field of immuno-oncology, where global pharmaceutical companies are actively investing. Leading domestic corporations are already being mentioned as strong licensing-out candidates, raising the possibility of large contracts and rising share prices. Corporations that have entered late-stage clinical trials may also regain favor in the market as rate sensitivity eases. Corporations that have diversified their pipelines to platformize their technology are traditionally popular with domestic investors and merit steady attention.
The stage for an earnings turnaround, the counterattack of K-beauty
Historically, while bio has led in liquidity-driven rallies, cosmetics have played a stable portfolio role in earnings-driven markets. In 2026, we may see both trends at once. The K-beauty boom also brings many tailwinds for cosmetics. On top of the theme of a recovery in Chinese consumption, individual corporations' earnings are also highly likely to rise.
Although the domestic cosmetics sector has been one of the few to maintain high growth, it has posted results that fell short of the market's lofty expectations over the past two to three years, suffering a form of stagnation. From next year, however, corporations showing explosive growth are expected to emerge.
This year, many large and small corporations streamlined inefficient brands, revamped marketing cost structures, and expanded sales channels beyond China to the United States, Southeast Asia, and the Middle East, improving their fundamentals. As a result, even a modest recovery in topline can rapidly improve operating profit, and share price gains could be steeper.
Domestic cosmetics corporations are targeting the global market with premium functional products. Derma lines (cosmetics that combine dermatological approaches), anti-aging products, ampoule-centric high-concentration skincare, and products linked to home-care devices are seeing surging demand not only in China but also in the United States, Southeast Asia, and the Middle East. Accordingly, sales in China are also growing at higher margins than before. While low-priced cosmetics remain sluggish, premium functional skincare is back on a growth track.
In the U.S. market, domestic cosmetics corporations are strengthening their position by expanding from online-focused channels into offline retail. The United States has a functionality-oriented consumption pattern and higher price points, making it the most profitable market; yet for domestic corporations it has been largely untapped, leaving substantial room for growth.
The premium cosmetics market should no longer be dismissed as merely a consumer goods sector. The technology and price competitiveness of domestic corporations, coupled with the popularization of skin procedures, are turning high-functionality skincare into a global trend.
The real AI-era beneficiaries: power grids and ESS
Lastly, energy storage systems (ESS) and the power infrastructure industry are unequivocally the best investment destinations, both long term and short term, in the age of artificial intelligence (AI). While "AI beneficiaries" such as semiconductors, AI solutions, and models may gain popularity, the area expected to face the fastest and most severe supply shortages as AI scales up is power. A single AI data center requires electricity on the scale of a small to mid-sized city, and the spread of electric vehicles and renewables will drastically heighten volatility on existing grids. ESS is the key technology to resolve this volatility. Without ESS, large-scale data centers, higher shares of renewables, and EV charging infrastructure are all impossible.
Moreover, after the U.S. Inflation Reduction Act (IRA), a new investment cycle in power infrastructure has begun worldwide. The Middle East needs ESS for large solar power projects, and Europe is seeing rising ESS demand as part of energy independence.
Domestic corporations have world-class capabilities in battery production, battery management systems (BMS), and container design, while addressing fire risks through technologies such as cell stability and thermal runaway suppression. They are therefore poised to benefit from this investment cycle.
The year 2026 is a special one in which liquidity, earnings, and policy momentum all converge. High-probability options—bio R&D, cosmetics, and ESS—are already in investors' hands. Next year, capture the starting point of the domestic liquidity cycle with investments in the bio sector, enjoy high growth from full-scale global expansion with investments in the cosmetics sector, and seize the biggest gains of the AI era with investments in the ESS sector.