In July, reports lowering target prices for domestically listed stocks from Korea's securities houses outnumbered those raising them. As volatility rose on concerns that artificial intelligence (AI) has peaked and semiconductor shares that had supported the local market slumped, a wave of target price cuts spread to shipbuilding and secondary batteries.
According to the financial investment industry on the 19th, from the start of the month through the 16th, Korea's securities firms issued 323 reports lowering target prices for listed stocks, 74 more than the 249 reports raising them. This is the first time this year that the number of reports cutting target prices has surpassed those raising them.
At the start of the year, as a boom in the domestic market centered on semiconductor stocks continued, there were more reports raising target prices. In particular, in January, there were 940 reports raising target prices, more than four times the 228 cutting them. Through June as well, reports raising target prices outnumbered those cutting them.
A rapid outflow of funds that had poured into the domestic market on the back of the AI-driven semiconductor boom became a headwind. Foreign investors, the key group determining moves in individual domestically listed stocks and indexes, recorded net sales of about 12.5 trillion won from the start of the month through the 16th.
Reports cutting target prices from securities firms are spreading across the market rather than being limited to specific sectors like semiconductors. Notably, the target price for Samsung Electronics, considered Korea's bellwether semiconductor stock, was lowered by domestic securities firms by more than 9%, from 430,000 won to 390,000 won.
Outlooks were also cut en masse for shipbuilding, internet and secondary battery stocks, which are classified among the largest by market capitalization in the domestic market. For Hanwha Ocean, categorized as a shipbuilding stock, there have been 10 reports cutting targets so far this month. For stocks such as Hyundai Motor and Kakao, there were 9 and 8 reports cutting targets, respectively.
The expansion of market volatility and the absence of a leading sector appear to have fueled the rise in reports from the securities industry lowering target prices. Target prices are typically raised when industry attention and the value of corporations are expected to increase, and conversely are cut when weaker industry growth heightens valuation burdens.
Weakness in semiconductor shares, which had driven inflows into the domestic market, also contributed to the increase in reports cutting target prices. When the overall funds flowing into the domestic market shrink, the buying power supporting individual stocks thins, and with weaker capacity to absorb sell orders, share prices are bound to be pushed down.
A source in the securities industry said, "Right now there is no clear leading sector to pull the market, and even the incoming funds are decreasing," adding, "Until buying power recovers, securities firms' research may lower expectations first, and the trend of cutting target prices could continue for the time being."