In the first week of February, the earnings season for major domestic and overseas corporations is expected to peak, testing the additional momentum for gains in the Korean stock market. As an unprecedented bull market unfolds, with the KOSPI topping the 5,300 level for the first time ever, some experts say a strategy of thorough "sector differentiation," rather than tracking the index, will determine winners and losers.
Last week (Jan. 26–30), the domestic stock market was the very peak of an "all-time bull run." The KOSPI started at 4,997.54 points and quickly climbed to close at 5,224.36 points. It especially surged intraday to 5,321.68 points, continuing its record high streak. The momentum in KOSDAQ was even fiercer. It soared nearly 15% over the week, setting a new high for the first time in 26 years since the dot-com bubble in 2000.
If KOSPI large caps drove the index higher in early January, recently there has been a strong "catch-up" rally in KOSDAQ stocks whose relative undervaluation has come into focus. In particular, on the 22nd of last month, the Democratic Party of Korea's "KOSPI 5000 Special Committee" fueled market expectations by presenting 3,000 points for KOSDAQ as a new policy target. As a result, individual investors' funds are pouring into exchange-traded funds (ETFs) that track the KOSDAQ 150 Index and leveraged products.
As momentum spreads across the market, experts advised that investors should pay as much attention to flows as to earnings confirmation. Samsung Securities said the trajectory of rising commodity prices, whether economies in emerging markets such as China are improving, and the direction of the won-dollar exchange rate, which has been increasing volatility in the mid-1,300 won range, will be key variables for the market going forward.
Also this week (the 2nd–6th), earnings announcements by major domestic and overseas corporations continue. In the United States, ▲ on the 2nd Palantir ▲ on the 3rd AMD ▲ on the 4th Alphabet and Qualcomm ▲ on the 5th Amazon will report results.
In Korea, Samsung SDI on the 2nd; Hanwha Ocean, Hyundai Engineering & Construction, and Kiwoom Securities on the 4th; and on the 5th, EcoPro Group as well as KB Financial Group, Shinhan Financial Group, JB Financial Group, and iM Financial Group are all scheduled to announce earnings.
NH Investment & Securities projected the KOSPI would likely move between 4,900 and 5,300 points this week. Na Jeong-hwan, a researcher at NH Investment & Securities, said, "Although stock prices have risen sharply recently, since earnings are supporting them, we maintain a long-term overweight in AI infrastructure-related names such as semiconductors, power equipment, nuclear power, and energy storage systems (ESS)."
He also said, "As separate taxation on dividends applies starting this year and more corporations are increasing dividends or paying special dividends, interest in corporations with dividend capacity is valid."
However, given the rapid surge in the market over a short period, it has become important to select stocks with room for further gains. KB Securities advised focusing on sectors that ▲ were left out of last year's leaders, ▲ have not yet boarded a full-fledged rally this year, and ▲ still remain at bottom levels in trading volume.
These "neutral stocks" include construction, steel, hotels and leisure, media and entertainment, cosmetics, retail, software, home appliances, and bio.
Kim Min-gyu, a researcher at KB Securities, said, "There are concerns that semiconductor stocks are at a peak, but meaningful stock price gains in semiconductors usually last about 1.5 to 2.5 years, so there is still time," adding, "It is advantageous to also hold machinery, electrical equipment, securities, utilities, and holding companies, which are not heavily left behind even if semiconductors lead and can defend returns when semiconductors decline."
Daishin Securities judged that strong semiconductor earnings have spread through rotation and that volatility in theme stocks has increased. Jeong Hae-chang, a researcher at Daishin Securities, said, "Since the valuation (corporate value) of the overall index is still not burdensome, domestic-demand stocks that have yet to receive market attention are likely to have more upside, and for leading sectors such as semiconductors, investors should maintain a buy-on-dips strategy."
Meanwhile, in the United States, the Institute for Supply Management (ISM) manufacturing and services indexes for January will be released on the 3rd (local time), and the January jobs report on the 6th. With the probability of a rate cut in the first quarter of this year low, the impact of the data releases on stock prices appears limited. Researcher Na Jeong-hwan said, "As the Federal Reserve's assessment of the economy is being revised upward, in an economic recovery phase it is necessary to gradually increase interest in materials, industrials, and consumer discretionary sectors, which have high earnings sensitivity."