IBK Securities raised its forecast band for the KOSPI to 8,000–11,000 points from the previous 6,500–9,000 points, reflecting the semiconductor upcycle and expectations for improved earnings.
Byun Jun-ho, a researcher at IBK Securities, said in a report on the 22nd, "From a top-down perspective, key domestic and external leading indicators such as economic leading indices and exports continue an upward trend, and earnings outlook and margin improvement centered on semiconductors are also continuing, so we are raising our KOSPI band outlook to 8,000–11,000 points."
The previous projection was 6,500–9,000 points. Byun said, "Through this summer rally, the KOSPI is expected to reach 10,000 points or exceed that level."
IBK Securities said the impact of the recently resurfaced geopolitical risks in the Middle East on the stock market would be limited.
Byun analyzed, "Although uncertainty will reemerge in the negotiations to be held over the next 60 days after the declaration to end the war, the possibility of changes to the big picture is low because there was agreement in broad terms," adding, "The likelihood of a full resumption of military operations and a sharp spike in oil prices is not high."
Instead, the market's attention is focused on Micron's earnings announcement scheduled for this week and on second-quarter results of domestic semiconductor corporations that will begin in earnest next month.
IBK Securities projected that Micron's results to be announced on the 24th (local time) are highly likely to beat market expectations. Given the recent improvement in the semiconductor cycle and the upward revision trend in earnings estimates, guidance for the fourth quarter is also likely to be presented positively.
It particularly emphasized that expectations are rising for Samsung Electronics' second-quarter results.
Byun said, "The consensus for Samsung Electronics' second-quarter operating profit was raised from 56 trillion won on Apr. 1 to 90.5 trillion won as of the 19th," adding, "We cannot rule out the possibility that the company will report strong results approaching 100 trillion won or exceeding 100 trillion won."
Byun explained, "With results having exceeded market expectations for three consecutive times, it is necessary to watch for the possibility of another beat as in past cases," adding, "When results beat expectations, the stock's performance before and after the announcement was clearly better than average."
IBK Securities projected that semiconductor-led earnings improvement will lead to a re-rating of KOSPI valuation.
Byun said, "The KOSPI's 12-month forward return on equity (ROE) has risen to 26% on the back of semiconductors, marking unprecedented high margins," adding, "The appropriate 12-month forward price-to-book ratio (PBR) is estimated at about 2.3 times, which corresponds to roughly 10,000 points for the KOSPI."
Byun added, "Through the second-quarter earnings season, ROE is expected to rise further, and since the price-earnings ratio (PER) remains low at around 8 times, we should also keep open the possibility that an appropriate PBR of 2.3 times could be exceeded," adding, "From a PER perspective, the market is significantly undervalued, so considerable upside potential is still latent."