Eight research center directors from major South Korean securities firms released survey results recommending investors adhere to core investment principles during the recent period of extreme market volatility that saw the KOSPI enter a sharp correction phase. The volatility intensified to the point where circuit breakers and sidecars activated on the day Samsung Electronics reported record quarterly earnings, and the VKOSPI, South Korea's volatility index, hit record highs. The directors from KB, Shinhan, Mirae Asset, Daishin, Samsung, Kiwoom, Meritz, and Hana securities firms emphasized portfolio construction and fundamental analysis over short-term market timing. The survey comes as the KOSPI shifted from record highs to a correction phase, freezing investor sentiment amid sharp swings.
Securities Directors Emphasize Portfolio Construction Over Market Timing
The directors surveyed by Chosun Biz stressed that portfolio composition and asset allocation become more critical as volatility increases. Park Yeon-joo, Mirae Asset Securities research center director, stated that investors should focus on industries or stocks with strong fundamentals that can withstand volatility from a mid-to-long-term perspective, or utilize ETFs to diversify risk. Park added that the ongoing AI revolution allows core companies to absorb significant added value, so investment in major global core companies should continue from a long-term perspective.
Hwang Seung-taek, Hana Securities research center director, proposed a strategy centered on benchmark index ETFs combined with defensive assets. Hwang explained that in periods of heightened volatility, portfolio construction that considers both index upside participation and downside protection is more important than predicting short-term index direction. Hwang recommended maintaining benchmark index ETFs as core assets with split purchases during corrections, while allocating some portion to short-term bond ETFs or MMFs to preserve capacity for responding to further corrections. Hwang added that covered call ETFs and dividend ETFs can serve as alternatives to reduce volatility.
Directors Recommend Using Corrections as Buying Opportunities
Some directors suggested viewing corrections as buying opportunities rather than causes for excessive caution. Yang Ji-hwan, Daishin Securities research center director, stated that in the current phase where earnings-driven and macro-driven markets remain valid, investors should utilize volatility expansion caused by weakened investor sentiment and supply concerns as opportunities to increase positions. Yang projected that strong Q2 earnings and bond yield/dollar stabilization following oil price level-downs will serve as drivers for KOSPI level-up in July-August.
Yang advised that investors should confirm leading EPS growth rate peaks, US monetary policy, and oil prices around late August to early September, after which a strategy responding to rotational selling centered on neglected stocks while enhancing portfolio stability will be necessary. Lee Jong-hyung, Kiwoom Securities research center director, also emphasized rotational selling flows where funds concentrated in semiconductors as the leading sector spread to other industries. Lee projected that the market will likely move from a semiconductor solo run phase to a stage where profit momentum gradually expands, with funds naturally moving to defense, securities, retail, biotech, financials, and shipbuilding during some profit-taking processes.
Directors Stress Adherence to Investment Principles During Volatility
The most common emphasis among directors was to avoid attempting to predict volatility and instead maintain individual investment principles. Kim Hak-kyun, Shinhan Securities research center director, stated that approaches attempting to respond to volatility itself are not desirable, and stocks should be approached from the perspective of partnering with companies. Kim continued that attempting to predict volatility easily leads to incorrect decisions of selling during fear and making belated chase purchases during uptrends, and if a company's value has not changed, there is no need to be excessively shaken by interim fluctuations.
Kim also noted that recent semiconductor concentration has actually increased the investment appeal of undervalued stocks, stating that there are many companies with high ROE and favorable dividend yields but PBR below 1x, and these companies can offer sufficient investment opportunities in the long term. Kim Dong-won, KB Securities research division head, emphasized that strategies following leading stocks remain effective in bull markets. Kim stated that the current market's leading stocks are AI semiconductors, and even if short-term corrections appear, a strategy centered on the market's core leading stocks is desirable if the long-term AI investment cycle remains valid.
Lee Jin-woo, Meritz Securities research center director, proposed a strategy focused on reducing losses rather than aggressive investment. Lee stated that given the intensified one-directional concentration phenomenon in the market, investors should avoid focusing on aggressive investments such as leverage during volatility periods. Lee added that if investors want to avoid downside volatility, buffer-type or loss-limiting index-linked products that may somewhat restrict upside returns but can respond during corrections can serve as alternatives.
FAQ
What strategy did Korean securities directors recommend during KOSPI volatility?
The eight research center directors surveyed by Chosun Biz recommended that investors adhere to core investment principles and focus on portfolio construction rather than attempting to time short-term market movements. Directors emphasized utilizing ETFs for risk diversification, maintaining positions in fundamentally strong industries and stocks, and incorporating defensive assets such as short-term bond ETFs, covered call ETFs, and dividend ETFs.
Why did circuit breakers activate on the day Samsung Electronics reported record earnings?
Circuit breakers and sidecars activated on the KOSPI market on the day Samsung Electronics reported record quarterly earnings due to extreme volatility, with the KOSPI declining sharply despite the positive earnings news. The VKOSPI, South Korea's volatility index, hit record highs during this period, reflecting heightened market anxiety as the index entered a correction phase after reaching all-time highs.
