The KOSPI index has crossed the ninth ridge toward the "10,000 points" summit. On the 18th, the KOSPI index broke through even 9,000 points, putting the 10,000-point mark within sight. Domestic and overseas securities firms are already offering rosy projections that the KOSPI index will top 10,000 points this year.
Experts cite the semiconductor supercycle driven by the expansion of the artificial intelligence (AI) industry and the MoneyMove of household funds fueled by government policies to revitalize the stock market as the backdrop for KOSPI's surge. Many say Korea's stock market has effectively entered a rerating phase where its weight class is changing.
However, there are no small number of tasks to firmly settle at 10,000. Because the solo rally by the semiconductor dual leaders (Samsung Electronics and SK hynix) has propelled the market's surge, some analysts say that for a stable landing at 10,000, stock gains in sectors beyond semiconductors and broad-based earnings improvement among corporations that will not be shaken by major countries' tightening currency policy are needed.
Many domestic and overseas securities firms project that the KOSPI index will surpass 10,000 points this year. Global investment bank Goldman Sachs sharply raised its 12-month target for the KOSPI index to 12,000 points from 9,000. JPMorgan, Morgan Stanley and Nomura Securities also said the KOSPI index could exceed 10,000 points. The main basis for these views is that the boom in memory semiconductors underpinning AI industry growth is stronger than expected.
The view among domestic securities firms is largely similar. Research centers at Samsung Securities, Korea Investment & Securities Co., Hana Securities and LS Securities expect the KOSPI index to top 10,000 points this year for the first time on record. With semiconductor profits surging, profits in the remaining sectors, including industrials and consumer goods, are also increasing, raising expectations for a stock rally driven by earnings improvement.
Household funds are flowing en masse into the stock market on the back of the government's market-boosting policies, providing momentum for the market's rise.
Investor attention is now focused on whether the KOSPI index, after breaking through 10,000 points, can stably maintain a "leveled-up weight class" for Korea's stock market.
Lee Jong-hyung, head of research at Kiwoom Securities, said, "A bull market driven by listed companies' earnings improvement will continue in the second half," but noted, "If concerns grow about a 'peak-out' in listed companies' profits after the second-quarter earnings season or if the U.S. Central Bank strengthens tightening, it could become an important variable for our stock market."
On the other hand, there are no few potential pitfalls that could hold back the market. In particular, concerns about a "peak-out (passing the peak)" in the semiconductor sector that has supported the market's rally are a detonator for the market. In fact, the market has already gone through several learning effects.
For example, in Apr., when OpenAI said "the pace of revenue growth is not fast enough," the "AI bubble" narrative spread and global tech stocks plunged. On the 5th, when U.S. semiconductor corporation Broadcom released its next-quarter AI-related revenue outlook ($16.0 billion) that fell short of the market consensus ($17.2 billion), global semiconductor stocks tanked.
Caution is also needed on the liquidity front. For now, household funds are heading en masse into the stock market, but major countries' tightening currency policy could put the brakes on this flow.
The Bank of Japan, Japan's Central Bank, on the 16th raised the benchmark interest rate by 0.25 percentage point to 1% from 0.75% annually. It is the first time in about 31 years, since Aug. 1995, that Japan's benchmark rate has risen to 1% annually. Central banks in other major countries, including Japan, are also raising rates in response to inflation. The European Central Bank (ECB) returned to a rate-hiking stance for the first time in about three years and this month raised the deposit rate to 2.25% annually from 2%, and the Bank of Korea has also signaled a benchmark rate hike next month.
The shock of monetary tightening can trigger a sharp correction in the stock market. Rate hikes not only increase corporations' funding costs, but can also cut off at once the flow of liquidity that had been heading into stocks. In particular, the recent surge in individuals who borrowed to invest in stocks during the sharp rally is a burden. In a bull market, leverage boosts returns, but if the market corrects, it acts to deepen losses.