On the 24th, brokerages rolled out forecasts that the KOSPI index will top 7,000 points this year. Analysts said the earnings trajectory of leading semiconductor corporations such as Samsung Electronics and SK hynix will be the key determinant that redefines the KOSPI band within the year.
That day, DB Securities calculated this year's KOSPI band at between 5,235 points and 7,044 points. Kiwoom Securities also raised the KOSPI's annual ceiling to 7,300 points from the previous 6,000 points.
Seol Tae-hyeon, an analyst at DB Securities, said, "Share prices have surged again since Oct. last year, but as earnings estimates have climbed steeply, the valuation burden has actually eased."
DB Securities cited the explosive upward revisions to 12-month forward earnings per share (EPS) as the main driver behind the upgraded KOSPI band this year. Earnings estimates for this year and for 2027 have risen 59.5% and 64.7%, respectively, compared with when last year's annual outlook was released.
Seol said, "Over the past 20 years, earnings estimates for the current and following year have been cut an average of 10.4% and 8.4% after the start of the year, but this year alone, EPS estimates have jumped 37.6% and 41.7%, respectively," adding, "This year's earnings expectations are at an all-time high."
The leap in earnings estimates, even without major changes in valuation multiples, is seen as lifting the index floor above past ceilings.
Kiwoom Securities said that although external conditions are tough—such as the U.S. Federal Reserve's monetary policy uncertainty and profitability concerns over U.S. artificial intelligence (AI) related stocks—the KOSPI has fundamentals and valuations robust enough to withstand external shocks.
Han Ji-young, an analyst at Kiwoom Securities, said, "Korea's forward EPS growth rate is running in the 140% range, while other competing markets such as the United States, Japan and Europe are stuck around the 10% range," adding, "Given the continued solo run in Korea's earnings momentum, even with short-term index-level burdens, it is advisable to avoid hastily turning to pessimism."
In particular, the overwhelming earnings power of domestic semiconductor corporations was cited as grounds that justify the recent KOSPI band.
Seol said, "More than 50% of the KOSPI's free-float market cap is in the IT sector, and based on the sum of market consensus (average estimates), more than 50% of total earnings estimates for this year and next are concentrated in Samsung Electronics and SK hynix," adding, "While the absolute level of 12-month forward EPS has spiked enough to deviate from its past normal path, the coefficient of variation (CV) of earnings estimates remains within a normal range."
Factoring in brokerages' operating profit estimates for Samsung Electronics and SK hynix, there could be further upward revisions to earnings estimates, the view said. Since Jan. last year, among all KOSPI listings, only 34 stocks have outperformed Samsung Electronics, and just eight corporations have beaten SK hynix.
Seol said, "The earnings direction of leading semiconductor corporations will be the key determinant that redefines the KOSPI band within the year, beyond mere index volatility."
As for concerns that foreign investor flows could be a potential risk factor, brokerages assessed them as profit-taking in nature. One analyst explained, "Given that most of the net selling has concentrated on sectors like semiconductors and autos—mega-cap names that staged explosive rallies in Jan.–Feb.—it is appropriate to view it as limited to profit-taking," adding, "It is also worth noting that passive foreign inflows that track the headline index are accelerating."