Hanwha Investment & Securities issued a report on the 15th recommending investors initiate phased buying when the KOSPI falls below 7300 and pursue aggressive purchases below 6600. Analyst Ahn Hyun-guk forecasts the KOSPI will fluctuate between 6600 and 8000 during July and August. The recommendation follows a recent sharp decline that eliminated much of the domestic market's price burden, though the analyst identified the lack of significant correction in US stocks as a potential risk factor for further downside.
Hanwha Investment & Securities Sets KOSPI Buy Levels at 7300 and 6600
Ahn Hyun-guk stated in the report that high volatility will continue during July and August. The analyst designated the area below KOSPI 7300 as a phased buying zone and below 6600 as an aggressive buying zone. The 7300 level represents a 20% decline from the previous peak. According to the analysis, KOSPI corrections exceeding 20% have occurred only once every three years on average over the past 50 years. The lower boundary of 6600 corresponds to the index level from late April, before extreme market concentration in semiconductors began.
Analyst Attributes Recent Decline to Speed Adjustment Rather Than Trend Reversal
Ahn evaluated the recent KOSPI plunge as a process of moderating an excessively rapid upward pace rather than a signal that the upward trend has ended. The analyst noted that KOSPI has given back more than half of its previous gains through the recent decline. The report stated that the current price burden is not significant given this degree of speed adjustment. However, the analyst recommended focusing on short-term profit-taking rather than long-term holding due to continued high volatility.
The report identified weakening support factors compared to earlier periods. The year-over-year growth rate of customer deposits, which indicates retail investors' purchasing power, surged to 153.1% in March but has since slowed to 66.8%. Historical patterns show that stock market upward momentum also weakens during periods when deposit growth rates decline.
Market expectations surrounding semiconductor earnings are also moderating. The number of brokerage target price upgrades around Samsung Electronics' quarterly preliminary earnings announcements decreased from 17 in October, 20 in January, and 17 in April to 5 this month. Target price downgrades appeared for the first time in a year, suggesting the possibility of a slowdown in earnings improvement over the next 12 months.
Report Identifies US Market Stability as Primary Risk Factor
The report designated US stock market correction as the single risk factor for Korean stocks. KOSPI has fallen 25.3% from its one-year high, while the Nasdaq index's decline amounts to only 4.5%. In past cases since 2020 where Korean stocks plunged first, US stocks subsequently fell with a time lag, causing Korean stocks to decline again.
The analyst emphasized the need to monitor the declining price-to-earnings ratios of the Magnificent 7 major US technology companies relative to the broader Nasdaq market. The Nasdaq's 12-month forward P/E stands at 23.6 times, while NVIDIA and Microsoft trade at 18.8 times and 19.9 times respectively. Ahn stated that investors must determine whether the declining P/E ratios of technology stocks represent an increase in valuation attractiveness or a reduction in the value investors assign to artificial intelligence-related company profits. The analyst advised close monitoring of US market and Magnificent 7 trends even during domestic market rebounds.
Semiconductor Sector Expected to Lead Rebound
The report anticipates semiconductors, which experienced the largest recent declines, will rise first during market rebound phases. However, the analyst advised considering battery and software stocks as well, given that retail investor buying activity is spreading across multiple sectors.
FAQ
What are Hanwha Investment & Securities' recommended KOSPI buying levels?
Hanwha Investment & Securities recommends phased buying below KOSPI 7300 and aggressive buying below 6600, according to analyst Ahn Hyun-guk's report issued on the 15th.
Why does the report identify US stocks as a risk factor for Korean stocks?
KOSPI has fallen 25.3% from its one-year high while Nasdaq declined only 4.5%. Historical patterns since 2020 show that when Korean stocks plunge first, US stocks subsequently fall with a time lag, causing Korean stocks to decline again.
