It was a week in which the KOSPI ran without a break. On the 12th-16th of Jan., the KOSPI continued its record-setting streak and on the 16th broke through 4,800 points, marking a record 11-session rally. It is just 200 points away from "5,000pi."
While Samsung Electronics set a new all-time high, eyeing "150,000 won," a rotation into flagship export sectors such as shipbuilding, defense, and autos drove the index to a higher level. Group-wide strength also supported the index, with Hyundai Motor Group shares rising on Humanoid Robot hopes and Hanwha Group shares advancing on spin-off news.
Securities experts said the KOSPI is likely to keep rising on earnings momentum despite a short-term surge last week. Because corporations' profit forecasts are being revised up faster than share prices are rising, the valuation appeal has actually grown even as the index has climbed, they said. NH Investment & Securities expected the KOSPI to move between 4,400 and 4,800 points this week.
Jung Hae-chang of Daishin Securities Co. said, "As the market digests the pre-earnings season, the KOSPI's forward earnings per share (EPS) has risen to 465 points," adding, "Despite rising share prices, valuation burdens are actually easing." The KOSPI's current forward price-earnings ratio (PER) is about 10.3 times, implying an earnings-driven market will continue.
Supply-demand conditions are also positive. Cho Byung-hyun of Daol Investment & Securities said, "For the market's uptrend to continue, steady inflows are needed," noting, "Client deposits are recently around 90 trillion won, which is encouraging as domestic funds are expanding regardless of volatile overseas inflows."
◇ Korea-U.S. economic data releases and Japan's rate decision… watch volatility
This week, investors should watch for volatility tied to domestic and overseas economic data releases. On the 22nd, the revised growth rate for Korea's fourth-quarter gross domestic product (GDP) will be released. While growth may slow somewhat due to a high base in the third quarter, the view is that robust semiconductor exports will support the broader economy.
The United States will also release the third-quarter revised GDP and the November personal consumption expenditures (PCE) price index on the same day. Because the releases were delayed by the U.S. federal government shutdown, creating a lag, it is unlikely they will change the short-term direction of monetary policy. However, if the numbers diverge significantly from market expectations, they could pose a psychological risk.
The Bank of Japan's (BOJ) policy rate decision scheduled for the 23rd is another key variable that could affect the market. While the market expects a hold at 0.75% annually, attention is on whether the BOJ's remarks will be hawkish (favoring currency tightening). If remarks are more hawkish than expected, liquidity concerns could emerge, including the unwinding of yen carry trades.
Kim Yu-mi of Kiwoom Securities said, "Given the upward pressure on import prices from a weak yen, the BOJ is likely to hold rates but deliver somewhat hawkish policy remarks." Still, as the risk of unwinding yen carry trades has already surfaced several times and been priced in, some say the actual impact on the market will be limited.
◇ Commercial Act amendment is an "opportunity," U.S. Supreme Court ruling a "risk"
On the policy front, the ruling party's "third Commercial Act amendment," slated for introduction this week at The National Assembly's Legislation and Judiciary Committee, could affect the market. Because the amendment centers on mandating the retirement of treasury shares, it is likely to be a tailwind for stocks with high treasury share ratios and for holding and securities sectors.
Externally, the so-called "gray rhino" risk (foreseeable but easy-to-overlook dangers) remains. The biggest variable is the U.S. Supreme Court's ruling on the Trump administration's tariff policy. As the ruling is delayed, President Trump said he would impose a 25% tariff on semiconductors re-exported via the United States. Market tension is elevated. There are concerns that tariff uncertainty could flare up again depending on the ruling.
However, experts see these variables as likely to remain short-term volatility factors. Na Jung-hwan of NH Investment & Securities said, "Factors that could weigh on risk assets remain, including rising concern about military clashes between the United States and Iran," but added, "Because these are short-term risk factors, investors should consider adding on pullbacks during rotations."
◇ Watch rotation into undervalued domestic-demand stocks… "Add leaders only on pullbacks"
Experts expect rotation centered on sectors undervalued relative to earnings next week. Jung Hae-chang of Daishin Securities Co. said, "With expectations for earnings season, the rotation is likely to continue for the time being," adding, "It would be good to watch domestic-demand sectors that have been left out of the tech rally and are undervalued versus recent results, such as IT hardware, nonferrous metals and wood, cosmetics, hotels and leisure, retail and distribution, and energy."
He added, "For leaders such as semiconductors, defense, shipbuilding, and holdings, which have high earnings contributions in the main board, their medium- to long-term earnings trajectories are solid, but we recommend increasing exposure on pullbacks during rotation rather than chasing."
This week will also see a string of earnings releases from major corporations at home and abroad. In Korea, results from Samsung affiliates such as Samsung Biologics (on the 21st), Samsung SDS (on the 22nd), and Samsung Electro-Mechanics (on the 23rd) will be announced. Overseas, earnings from Netflix (on the 20th) and Intel (on the 22nd) are expected to serve as barometers for the IT cycle. In particular for Intel, the market is focused on the possibility of "sell on," with profit-taking likely to pour in after the release.