KOSPI's 12-month forward price-to-earnings ratio fell to 6.17x as of July 8, dropping below the 6.27x trough recorded during the 2008 global financial crisis, according to a July 9 report by Daishin Securities analyst Lee Kyung-min. The decline occurred despite the index's 12-month forward earnings per share rising to 1174 points from 1105 points at the end of June. Lee attributed the sharp index drop to excessive concentration in semiconductor stocks and the unwinding of leveraged positions, rather than deteriorating corporate fundamentals. KOSPI fell to the 7200 level in July after reaching an intraday record high of 9385.59 in June, marking a decline of over 20% from the peak.
KOSPI 12-Month Forward PER Falls to 6.17x, Below 2008 Financial Crisis Level
KOSPI's 12-month forward PER stood at 6.17x as of July 8, according to Daishin Securities. This level is lower than the 6.27x recorded when KOSPI fell below the 1000 level during the global financial crisis. The index's 12-month forward EPS rose to 1174 points as of July 8, up from 1105 points at the end of June. Samsung Electronics and SK Hynix saw their share prices decline 25.9% and 30.5% respectively from their June highs, while mid- to long-term earnings forecasts for both companies have been revised upward. The index triggered its sixth circuit breaker of the year during the decline.
Daishin Securities Recommends Split Buying Strategy at 7000 Level
Lee Kyung-min stated that the recent decline represents a short-term correction within a mid- to long-term uptrend rather than a fundamental deterioration. He noted that KOSPI broke below major moving averages but now sits at a level where "even small positive news can trigger a sharp reversal." Lee compared the current situation to late March through early April, when KOSPI faced downside risk of breaking below the 5000 level due to Middle East risks, oil price surges, and interest rate and exchange rate pressures, but subsequently rebounded strongly on ceasefire expectations and robust semiconductor export data. Lee recommended that investors with high cash positions begin split buying and accumulation strategies from the current index level in preparation for KOSPI reaching the 10000 level. He characterized any break below the 7000 level as an undershooting phase where buying strategies utilizing volatility would be appropriate.
US June CPI Release on July 14 and Q2 Earnings Season Cited as Potential Turning Points
Daishin Securities identified the US June Consumer Price Index release on July 14 and the second-quarter earnings season as potential inflection points. The firm projected June CPI could decelerate to 3.92% year-over-year from 4.2% in May. Lee stated that easing inflation pressures could create cracks in interest rate hike concerns and dollar strength trends, potentially stabilizing bond yields and the dollar at lower levels. On the earnings front, Lee stated: "In the second-quarter earnings season, we expect strong performance not only in semiconductors but also in sectors excluding semiconductors and export-oriented stocks." He projected that if broad-based earnings improvement emerges supported by export momentum and exchange rate effects, it could lead to reduced KOSPI concentration and stronger upside momentum.
18 Sectors Enter Undervalued Territory on Weekly Basis, Daishin Securities Data Shows
The number of undervalued sectors increased significantly following the recent correction, according to Daishin Securities. On a weekly basis, 18 sectors entered undervalued territory relative to earnings; on a monthly basis, 20 sectors; and on a three-month basis, 21 sectors. The semiconductor sector, which had been in overvalued territory on one-month and three-month bases, shifted into undervalued territory. On weekly and monthly bases, IT hardware and semiconductors showed the greatest undervaluation appeal. Machinery, semiconductors, IT appliances, shipbuilding, construction, energy, and chemicals were classified as undervalued sectors across all three timeframes (weekly, monthly, and three-month change rates).
FAQ
What is KOSPI's current 12-month forward PER compared to the 2008 financial crisis level?
KOSPI's 12-month forward PER stood at 6.17x as of July 8, according to Daishin Securities. This is lower than the 6.27x level recorded when KOSPI fell below 1000 during the 2008 global financial crisis.
What caused KOSPI's recent decline to the 7200 level despite rising earnings forecasts?
Daishin Securities analyst Lee Kyung-min attributed the decline to excessive concentration in semiconductor stocks and the unwinding of leveraged positions, rather than deteriorating corporate fundamentals. KOSPI's 12-month forward EPS actually rose to 1174 points from 1105 points at the end of June.
What events does Daishin Securities identify as potential turning points for KOSPI?
Daishin Securities identified two key events: the US June CPI release on July 14, which the firm projects could show deceleration to 3.92% year-over-year from 4.2% in May, and the second-quarter earnings season, where the firm expects strong performance across semiconductors, other sectors, and export-oriented stocks.
