On Feb. 28, right after war broke out in Iran, the KOSPI index, which had plunged sharply, recovered the 6,000-point mark after 30 trading days. Even as oil prices surged due to the war and markets swung sharply, the KOSPI index is reclaiming its previous peak on the back of improved earnings by corporations centered on the semiconductor sector.
There are signs of a shift in the stance of securities firms that had emphasized "risk management." A forecast emerged that the KOSPI index could top 7,000 points once the shock of the war subsides.
On the 14th, the KOSPI index topped 6,000 points during the session. As gains narrowed, the KOSPI index closed below 6,000 points, but there are signs it is recovering to prewar levels.
Positive outlooks are gaining traction in the securities industry as well. NH Investment & Securities said it would maintain the annual KOSPI upper target of 7,300 points presented early this year. Research head Jo Su-hong at NH Investment & Securities said, "As with the Russia-Ukraine war, geopolitical issues are worked out over time," adding, "Markets are reacting less to war, and if Middle East issues ease, interest rates, inflation and exchange rates will stabilize, and the KOSPI's upward trend will continue."
They added, "We expect the KOSPI index to rise further due to profit growth centered on semiconductors, policies to invigorate the capital market, and increased global fiscal expenditure."
KB Securities also set its year-end KOSPI upper target at 7,500 points and said the index would climb in a virtuous cycle driven by semiconductor earnings.
Kim Dong-Won, head of research at KB Securities, said, "As semiconductor earnings improve, a virtuous cycle into the macroeconomy will continue," adding, "The two semiconductor corporations' expected net profit this year is $300 billion, and corporate tax is projected at 140 trillion won. If dollars flow in through investment in domestic semiconductor plants, it will help stabilize the exchange rate, and if the government uses corporate tax to issue Government Bonds, the bond market will also become more active."
They added, "If the exchange rate stabilizes, the KOSPI itself can become an attractive investment destination for global investors."
The securities industry predicted that not only semiconductor corporations but also several domestic industries would post strong results. Kim said, "This year's KOSPI operating profit is forecast at 792 trillion won, up 165% from a year earlier, and even excluding semiconductors, it is expected to rise 37%," adding, "Defense, shipbuilding, refining and energy corporations are also seeing improved results."
Lee Seung-hoon, head of IBK Securities' center, said, "Industries such as defense and shipbuilding also have upside," adding, "In particular, export industries have advantages from the exchange rate perspective, so considering this, I think they can post results above the market consensus."
However, to keep the KOSPI index steadily trending upward, some cautioned that Korea's market must overcome structural volatility risks in which the index swings with foreign investor fund flows.
Park Yeon-ju, head of research at Mirae Asset Securities, said, "Korea is an emerging market with high exchange-rate volatility," pointing out, "Foreign flows have a big impact, and the high weight of cyclical sectors makes market volatility large."
Experts broadly agreed that listed companies' earnings are ultimately the most important variable for the market's trajectory ahead. Park said, "For the KOSPI to rise over the long term, there must be many corporations with global competitiveness and steady growth, like in the United States," adding, "It is important to foster an environment where Korean corporations with global competitiveness can grow, through talent development, nurturing a startup ecosystem, and enabling efficient asset allocation."
There was also advice that government support is needed for a medium- to long-term market rise. Kim said, "In the United States, financial assets account for 38% of household asset holdings, while in Korea it is 8%," adding, "If the government supports a long-term demand-supply structure through measures such as fund-format management of retirement pensions, the KOSPI can trend upward over the long term."