The KOSPI, which had been racing ahead by renewing its record high, has entered a sharp correction phase, freezing investor sentiment. Volatility peaked to the point where a sell sidecar and circuit breaker were triggered in succession on the KOSPI market even on the day Samsung Electronics posted its biggest quarterly results ever.
The KOSPI 200 Volatility Index (VKOSPI), known as Korea's fear gauge, also smashed its record high again, reflecting market anxiety.
On this volatility-driven market with repeated short-term surges and plunges, heads of research at major domestic securities firms advised, "Rather than rashly trying to time the market, this is the time to stick to your core investment principles."
A ChosunBiz survey of heads of research at eight major domestic securities firms (KB, Shinyoung, Mirae Asset, Daishin, Samsung, Kiwoom, Meritz, Hana) on second-half investment strategies found a prevailing view that investors should focus on the fundamentals of long-term growth industries and corporations rather than being swayed by short-term swings.
◇ "Portfolio matters more than market direction"…first build a structure that can withstand volatility
The heads agreed that the higher the volatility, the more important portfolio construction and asset allocation become over short-term trading.
Park Yeon-ju, head of research at Mirae Asset Securities, said, "It is difficult to catch the market trend in the short term, so from a mid- to long-term perspective, you should invest in industries or stocks with strong fundamentals that can tolerate volatility, or use ETFs that can diversify risk," adding, "The ongoing AI revolution allows core corporations to capture much added value, so investors should continue to invest in major global core corporations from a mid- to long-term perspective."
Hwang Seung-taek, head of research at Hana Securities, also suggested a strategy of combining defensive assets around benchmark index ETFs.
Hwang said, "In a period of heightened volatility, portfolio construction that enjoys index upside while also considering loss protection is more important than trying to guess the index's short-term direction," explaining, "Keep benchmark index ETFs as core assets, buy in tranches on pullbacks, and include some liquidity assets such as short-term bond ETFs or MMFs to retain capacity to respond to further corrections." He added, "Covered-call ETFs or dividend ETFs can also be alternatives to reduce volatility."
◇ "A correction is rather an opportunity"…maintain leaders but prepare for rotation
Some also said investors should use corrections as buying opportunities rather than being overly wary of volatility.
Yang Ji-hwan, head of research at Daishin Securities, said, "In the current phase where both an earnings-driven market and a macro-driven market are intact, investors should use volatility arising from weakened sentiment and supply-demand instability as a chance to increase exposure," forecasting, "Strong second-quarter earnings and lower oil prices leading to stable bond yields and a steady dollar will power a KOSPI level-up in July–August."
However, "around late August to early September, investors should check whether the leading EPS growth rate has passed its peak, along with U.S. monetary policy and oil prices," adding, "After that, a rotation strategy centered on neglected stocks while enhancing portfolio stability is needed."
Lee Jong-hyung, head of research at Kiwoom Securities, likewise emphasized a rotation in which funds concentrated in the leading semiconductor sector spread to other industries.
Lee said, "There is a high possibility of moving from a phase of semiconductor dominance to a stage where profit momentum gradually broadens," adding, "During some profit-taking, funds will naturally move to defense, securities, retail, bio, finance, and shipbuilding."
◇ "Don't try to predict volatility"…ultimately what matters is investment principles
What the heads most commonly stressed was not to try to predict volatility but to keep one's own investment principles.
Kim Hak-kyun, head of research at Shinyoung Securities, said, "It is not desirable to take an approach that tries to respond to volatility itself," adding, "Stocks should be approached from the perspective of going into business with corporations." He continued, "If you try to time volatility, you can easily make poor decisions—selling in fear and chasing late in a rising market," adding, "If a corporation's value has not changed, there is no need to be overly shaken by the ups and downs in the middle."
Some also noted that the semiconductor tilt has actually increased the investment appeal of undervalued stocks. Kim said, "There are quite a few corporations with high ROE and decent dividend yields but PBRs below 1," adding, "These corporations can offer ample long-term investment opportunities."
Kim Dong-Won, head of research at KB Securities, emphasized that, in the end, a strategy of following the leaders is effective in a bull market. Kim said, "The market leaders now are AI semiconductors, and even if there is a short-term correction, if the long-term AI investment cycle holds, it is desirable to take an approach centered on the market's core leaders."
Lee Jin-woo, head of research at Meritz Securities, proposed a strategy of reducing losses rather than aggressive investing. Lee said, "Given the deepening one-way concentration in the market, investors should avoid focusing on aggressive investments such as leverage during volatile periods," adding, "For those seeking to avoid downside volatility, buffer-type or loss-limiting index-linked products can be alternatives, though upside returns may be somewhat capped during rallies."