Kospi 2,700, where is it headed?

The KOSPI and KOSDAQ indices both fell by over 1% due to continued foreign selling and a shift in supply and demand participants.

As KOSPI and KOSDAQ were pushed down by more than 1% due to aggressive foreign selling, a change in supply and demand participants is weighing on the market.

While the possibility of sell-offs due to the expiration of ADR 90-day lock-up shares is being discussed, the sharp decline of SK Hynix, contrasting with Nasdaq's new highs, is difficult to attribute to clear reasons.

The temporary adjustment in memory semiconductors is merely a short-term excessive decline, and the overall trend has not been damaged.

Micron Technology showed astonishing results, with long-term contract proportion exceeding 35% and a gross profit margin of 87%, suggesting Samsung Electronics' earnings should not be viewed too conservatively.

Guidelines related to enhancing shareholder value, which were a hurdle in the previous earnings announcement, have largely been addressed, so they are not expected to significantly impact this earnings release.

Foreign investors appear to be reflecting expectations by purchasing about 1.5 million shares of Samsung Electronics amid a difficult market.

Even if memory semiconductors, the sector with the best performance among those benefiting from AI momentum, experience a temporary dip, it is unlikely to be a trend reversal.

The KOSDAQ index, which rebounded from its July 29 low, had a first target of 920-960 points, which it nearly reached yesterday.

CEO Lee Ji-hwan advised short-term investors to reduce their positions in the current range and long-term investors to confirm further direction.

CEO Lee Ji-hwan predicted that while an increase in both KOSPI and KOSDAQ would be the best signal, if KOSPI rebounds mainly led by semiconductors and KOSDAQ declines, KOSDAQ would remain in a limited range.

As the AI momentum rotation has completed one cycle, a temporary breather is expected, so it is necessary to select companies that can withstand volatility in raw material prices and exchange rates.

With the AI momentum rotation completing from power equipment to memory semiconductors, CPUs, and Nvidia, a temporary resting period for the Sobu Jang sector is anticipated.

CEO Lee Ji-hwan predicted that this earnings season would see differentiation between stocks with actual earnings support and those without.

While he doesn't believe the Sobu Jang sector's rally is over, he advised selectively approaching stocks with strong earnings and momentum, as both front-end and back-end processes carry price burdens.

After Samsung Electronics' preliminary earnings announcement, the direction of individual stocks is expected to be decided around next week, and it is advisable to approach stocks that break through resistance levels at that time.

Given the considerable price burden on current Sobu Jang stocks, a selective approach focused on stocks with confirmed earnings improvement is necessary.

Theme stocks emerging at the end of the current box-range convergence have a short duration, lasting at most one or two days, and often even ending on the same day, making them difficult for slow investors to respond to.

With Samsung Electronics' preliminary earnings announcement as a turning point, the out-of-sync rhythm between semiconductors and secondary batteries is expected to resolve, leading to a consolidation of the theme stock market.

Although major events such as Samsung Electronics' earnings announcement, options expiration, and FOMC minutes release are concentrated tomorrow, CEO Lee Ji-hwan predicted that the additional downside would be limited due to the already unfavorable market trend.

If uncertainties are resolved after tomorrow, the market next week has the potential to form a short-term bottom and improve.

Short-term investors should reduce their positions, and long-term investors need to make decisions after Samsung Electronics' preliminary earnings announcement tomorrow.

While large-cap semiconductor stocks are experiencing a short-term supply-demand imbalance, there are no fundamental or momentum issues. Once the short-term supply-demand entanglement passes, large-caps may prove to be a better choice.

Since mid-September, risks such as 10-year Treasury yields exceeding 5.0% and oil prices breaking $100, leading to interest rate hikes and AI slowdowns, have emerged. In October, it is necessary to monitor the market while confirming upward triggers like Samsung Electronics' preliminary earnings announcement.

It is currently difficult to definitively attribute the reasons for the adjustment in our market.

Lack of foreign supply and demand, and weakened buying sentiment ahead of major events like Samsung Electronics' preliminary earnings announcement and CPI data release, are cited as reasons for the correction.

If the US market declines, using Treasury yields as an excuse, there is a high possibility that it will not be a short-term correction but rather a more prolonged one.

It seems advisable to realize profits of at least 10-20%, or even 20-30%, from semiconductor Sobu Jang stocks that have entered the profit zone.

As the semiconductor industry conditions have changed between the first and second halves of the year, it is important to focus on the rotation of small and mid-cap stocks in the second half and be mindful of KOSDAQ stocks that tend to weaken as earnings season approaches.

Careful response is needed by referring to key October schedules, including Samsung Electronics' preliminary earnings announcement on October 8, CPI data release after Korea's holiday on October 9, SK Hynix's earnings announcement on October 27, and the FOMC meeting on October 27-28.

He particularly recommended keeping an eye on glass substrate related stocks such as SKC, Philoptics, J&TC, and Chemtronics.

It is advantageous to focus on relatively strong stocks like Daeduck Electronics, which have seen a smaller decline from their peak, rather than those that have already risen significantly.

Checking which company is expanding its ESS proportion relative to total sales more quickly seems to be objective data.

Large-cap semiconductor stocks with no fundamental or momentum issues are undervalued, while Sobu Jang stocks that have already reached high levels have lost price attractiveness.

This company specializes in liquid cooling systems, and is therefore expected to react sensitively to the growth of the ESS market.

Hanjoong NCS, which is more sensitive to the growth of the ESS market than electric vehicles, can be a valid option in the current market.

Department Head Kim Tae-sung advised that during a market correction, it is crucial to narrow down investments to a few individual stocks within sectors like semiconductor Sobu Jang and secondary batteries that are expected to show good earnings.

As the cause of the market correction is unclear, a conservative approach should be maintained rather than rashly switching stocks.

Macro variables such as WTI oil prices exceeding $90 and US 10-year Treasury yields nearing 5.3%, with 30-year yields approaching 5.7%, are adding to market pressure.

While the US stock market is hitting all-time highs, the strong dollar is causing capital outflows from emerging markets.

Korea, with its large semiconductor proportion, shows a different trend, and the Taiwanese stock market, supported by TSMC, remains robust.

WTI exceeded $90 due to geopolitical issues, and videos of the Saudi oil facility bombing further dampened market sentiment.

Market participants are looking for reasons for the decline, and global government bond sentiment is currently unfavorable.

The market expects it to perform better than the initial estimate of 104 trillion won, but despite operating profit of 100 trillion won being a quarterly first, there is skepticism about further gains due to the perception that it's already priced in.

Market views on Samsung Electronics' earnings, comparing them with Nvidia's market capitalization, are mixed with concern. Experts believe that even if Samsung Electronics' earnings reach 100 trillion won, it may be difficult to meet market expectations, citing clear profit growth and proof of competitiveness as prerequisites.

Some explained that issues include the HBM4 8-layer specification being lower than Samsung Electronics' and Micron's 10, 12-layer versions, potential heat dissipation problems, and sluggish investment equipment orders.

Hanjoong NCS is virtually the only company whose entire revenue, excluding parts AS sales, comes from ESS.

With unlimited investment not possible, the recent sharp rise is largely attributed to an acceleration of investment speed.

Even with large-scale investments, sustained long-term earnings growth remains uncertain. Therefore, it is advisable to selectively approach companies with specialized equipment or new customers rather than general-purpose equipment.

Gaon Cable showed volatility, closing at -5% from an opening of 7.3%, and it is pointed out that technical responses are needed for stocks near their peak.

Foreign investors have repeatedly reduced their selling pressure at the end of the trading day to defend the index. Yesterday, there was a significant purchase of call options, but today they shifted positions to put purchases and call sales, reversing their positions ahead of options expiration.

This change in supply and demand is interpreted as a strategy to induce index volatility around the expiration date.

The evaluation period has ended, but a follow-up commercialization contract has not been signed.

Immediately after this news, Peptron's stock price plummeted by nearly 24%.

CEO Jang Woo-jin recommended selling, stating that since the stock price had risen due to expectations of technology transfer, it could fall to the 40,000-50,000 won range if it declines.

Even with news related to aerospace, such as the Nuri rocket launch, related stocks tend to fall. Many space companies often do not have visible earnings, so event expectations are often already reflected in stock prices.

Therefore, a strategy of selling on or immediately before the day of the event may be appropriate, and one should be wary of the possibility of stock prices falling regardless of the success of the news.

Lee Eun-taek, Executive Director at KB Securities, who analyzed three bubble collapses over the past 120 years, explained that a trend of rising interest rates was a key factor leading to market declines.

Interest rate hikes, which increase the cost of capital procurement, become a decisive downward factor that dampens investor activity.

If the US 10-year Treasury yield exceeds 5.5%, there is a risk of downward pressure on the price-to-earnings ratio (PER) of the stock market.

However, he predicted that a market collapse would begin when a sense of 'No Way Back' despair forms, where interest rates are expected to continue rising without any possibility of turning around, rather than just a simple interest rate level.

An analysis revealed that by the time a decline in corporate profits is noticed, stock prices have already fallen, and most are even nearing rock bottom.

Toshiba's HDD expansion could stimulate a decrease in NAND flash demand, putting pressure on SK Hynix's stock price, but there is also a contrary view.

Historically, in the three bubble collapse processes, sharp rises in interest rates and inflation preceded decreases in corporate profits.

Therefore, he advised that investors should prepare for market risks when they conclude that inflation is not a temporary phenomenon.

Lee Eun-taek's analysis suggests that when an economic downturn becomes visible around mid-next year, structural risks such as hidden debt and unsold properties are likely to surface.

He warned that an economic downturn in mid-next year should be considered, and the next recession could be tougher than previous ones.

Earnings estimates are inherently lagging indicators, limiting their use as signals predicting a market decline.

In a low-inflation environment, the impact of inflation is small, making it rational to base investment decisions on unemployment figures.

In a high-inflation era, inflation itself becomes the key indicator, and stock prices tend to rebound when inflation slowdown accompanied by rising unemployment is confirmed.

Investors must reset their criteria for reading the market to align with the changed macro environment.

Currently, the interest rate hike cycle and monetary policy levels are similar, and the assessment of inflation could be a critical turning point for the market.

He explained that stock prices tended to peak and collapse when inflation concerns grew, especially when the CPI came out higher than expected.

Emerging countries with high dollar-denominated debt performed poorly, and with the added debt crisis originating from France, European stock markets also recorded declines of around 2%.

Despite this environment, Taiwan, Japan, Korea, and the US Nasdaq, which have AI-related value chains, performed relatively well, leading the market.

The Korean Kospi index has risen by approximately 68% from 4,400 to 6,900 year-to-date, achieving excellent performance, ranking first or second among Asian stock markets alongside the Taiwan Weighted Index.

Nevertheless, the main reason individual investors feel frustrated is that many of them concentrated their leveraged investments during the late rally, especially from late May to June.

CEO Song Jae-kyung emphasized that investors likely experienced FOMO (Fear Of Missing Out) by hesitating and then entering the market late, and that a sober review of why they bought a particular stock is essential for successful investing.

Stock yield, which represents the investment return of stocks, is calculated as the inverse of the price-to-earnings ratio (PER), and the relative attractiveness of stocks versus bonds can be assessed through the yield gap, which is the difference with the bond yield.

Considering that the US 10-year Treasury yield is currently 5.3% while the average PER of the US stock market is about 20 times, the stock yield is 5%, making stocks less attractive than bonds, resulting in a negative yield gap.

However, the average PER of the Korean stock market is around 6 times, leading to a stock yield of 18%, which is significantly higher than the Korean 10-year Treasury yield, resulting in a yield gap of 13.84%.

This suggests that the Korean stock market is undervalued compared to bonds relative to the US, indicating that stocks can still be a more attractive investment than government bonds.

For example, Nvidia, a major US semiconductor company, has a PER of 17 times, which is lower than the average of the Philadelphia Semiconductor Index (23-24 times), sometimes leading it to be considered undervalued.

However, in terms of actual earnings contribution, Micron appears to generate greater profits than Nvidia, and Micron's PER is 7 times, while Samsung Electronics and Hynix trade at 5-6 times. This analysis suggests that a low PER may not necessarily mean undervaluation due to the nature of the 'memory semiconductor cycle' industry.

Some also argue that the low PER of the Korean market may be the result of a complex interplay of structural factors like the Korea Discount, in addition to earnings contribution.

Despite excellent performance by Korean companies and continuous positive news, foreign investors tend to withdraw from the market, leading to complaints that these positive factors are not fully reflected in stock prices.

The speaker expressed disappointment regarding the persistent foreign selling despite the Korean market's undervaluation, indirectly implying the need for institutional improvements to resolve this market disparity.

Excluding the case of -14% in 2018, out of 13 fourth quarters since 2013, 12 ended with gains, showing an average return of 5.4%, raising expectations for an year-end rally.

However, in 2018, there was an exceptional decline of -14%.

For the fourth quarter of this year, high expectations for the third-quarter earnings season (29% EPS growth expected) and a Christmas rally forecast remain valid. However, if corporate earnings fall short of overly high market expectations, there is a possibility of disappointment-driven selling.

Furthermore, as the profit growth rate is expected to gradually decrease after the fourth quarter, how the market reacts to this will be a crucial point of observation.

Recent semiconductor export data shows a sharp increase: $42 billion in July, $46 billion in August, and over $60 billion in September. Based on this, CEO Yoo Chang-hee predicted that Samsung Electronics' provisional earnings would reach 110 trillion won, surpassing market forecasts of 102-107 trillion won.

The basis for this forecast is an internal calculation based on recent semiconductor export data, confirming semiconductor export amounts exceeding $42 billion in July, $46 billion in August, and $60 billion in September.

If 110 trillion won (or around 109-111 trillion won) is actually announced, Samsung Electronics' stock price is expected to rise by 3-3.5%, easily reaching the 280,000 won range.

Unlike entertainment or bio stocks that see temporary surges in the market recently, large-cap stocks like Samsung Electronics have a significant impact on the entire market, making their earnings announcements even more crucial.

HPSP holds nearly 70% market share, and PSK Group and HPSP both boast high operating profit margins of 40-50% on average, demonstrating their technological prowess. He assessed such companies as highly attractive from an investment perspective.

Furthermore, with the growth of the HBM (High Bandwidth Memory) market requiring 8-12 times more post-processing work compared to DRAM, there is also interest in companies with strengths like Hana Micron, a post-processing OSAT company.

However, there is a tendency to avoid investing in material and component companies with low trading volumes, and instead, technical analysis focusing on chart patterns rather than corporate performance is used to identify optimal buying and selling points for major stocks like Jusung Engineering and EO Technics.

He pointed out that LG Energy Solution has a high proportion of electric vehicles (EVs), which makes it ambiguous compared to Samsung SDI in terms of ESS strategy, and suggested a strategy of selecting companies with strengths in specific areas.

Conversely, he took a very cautious stance on investing in the pharmaceutical and bio sector. While short-term trading is possible through technical analysis, it is difficult for general investors to understand the companies' technologies, and there are few comparable past cases, leading to a high risk of 'hit or miss' investment.

Therefore, he concluded that focusing on semiconductor materials, parts, and equipment or specific areas of secondary batteries that one can fully understand and analyze is advantageous for risk management.

This is because Korean space-related companies have sometimes seen significant short-term stock price increases due to expectations of SpaceX's listing, but the pattern of falling again upon the disappearance of news repeats.

This leads to an analysis that domestic companies find it difficult to break through thick resistance levels and show a pattern of collapsing again after a short-term reaction.

The power equipment sector is also judged to have weakening upward momentum for related stocks such as transformers, as the focus is shifting from expanding power infrastructure to maintaining existing facilities.

Over the past week and this week, it has repeatedly gone up to 5.3% and then come down slightly.

Hedge funds' short positions in 10-year Treasury futures are set at 2.04 million contracts, which is historically high since 2.5853 million contracts in August 2025.

He believes that if these factors are resolved and Treasury futures fail to break out, there is a high possibility of liquidation, which could lead to a rapid decrease in interest rates. If concerns about interest rate hikes are significantly alleviated, the Korean stock market could see a strong rebound.