After Chuseok, Ride the 'Resting Horse' in the Stock Market

Last year, South Korean Kospi companies' earnings grew significantly from approximately 300 trillion won to currently 900-1,000 trillion won.

This corporate earnings growth is analyzed as having driven index gains, reflecting the Kospi's breakthrough of 5,000 points in January this year in advance.

It was pointed out that these funds artificially boosted stock prices through derivatives, regardless of fundamentals, but such supply-driven gains are temporary and risk a sharper decline than a bubble during a downturn.

Stock price increases driven by leveraged products inevitably come with a cost, it was explained.

In the past, it took over 13 years for the Kospi to break from 2,000 to 3,000, and about 5 years to break from 3,000 to 4,000.

However, this year's jump from 4,000 to 8,000 in the first half was an abnormally rapid surge over just 7 months, and the recent boxed trend is rather an analysis that it is a return to average figures.

Conservative investors who prioritize fundamentals experienced opportunity costs by selling when the index was at 7,000, but selling at the peak of 9,000 is close to luck and is considered an area difficult for general investors.

The fact that many individual investors have suffered losses despite the index rising over 60% since the beginning of the year reflects this market characteristic.

The surge in Samsung Electronics shareholders to 8 million in the last three months demonstrates the market principle that when everyone is confident, stock prices tend to fall.

Riding a running horse is a strategy for skilled traders, and when the running horse tires, one should sell and exit.

The 'resting thoroughbred' strategy, which involves buying structurally growing stocks when they are resting, is recommended, with an relief rally expected from November after Chuseok, along with interest rate cuts.

The Korean semiconductor industry analyzed the market share expansion of CXMT, which announced plans to expand production to Micron's scale by 2028, as the biggest threat. CXMT, listed on July 27, currently has small profits but was identified as a 'gray rhino' that will pressure Korean companies in the long term.

This company currently holds only 8% of the DRAM market share, but with this listing, it is expected to achieve production capacity similar to Micron by the end of 2028.

While currently a small threat in terms of profit scale, the growth of China's memory industry could become a huge 'gray rhino' for Korean companies in the future, it was warned.

72 trillion won in funds purchased by individual investors at high prices are acting as a strong resistance line against stock market gains.

The 'break-even sentiment' to sell when stock prices approach the purchase price is strong, limiting index gains. To absorb this selling pressure during a future rebound, new large-scale fund inflows are essential.

It is pointed out that for foreign investor flow to recover, the profit-defending capabilities of semiconductor companies must be verified.

Consistently maintaining a certain level of profit margin even during downturns is a key condition for long-term foreign investment.

The high volatility of the semiconductor cycle acts as a factor making it difficult for foreign investors to consistently hold Samsung Electronics like a 'pet stock.'

It is analyzed that 9 out of 10 people investing in semiconductors are effectively trading.

For the semiconductor sector, where profits are not expected to decline, contrarian buying when stock prices fall is effective, and if trading is difficult, a long-term investment strategy of steadily accumulating good stocks is needed.

However, it's important to note that historically, initial interest rate hikes led to periods of adjustment, but subsequently, the market absorbed the rate hikes and stock prices rose.

The possibility of an oil price surge is deemed low, as the US has secured Venezuela's oil reserves.

Current interest rate hikes are a commitment to curbing inflation, and if there are no drastic increases in oil prices, gradually implemented rate hikes are at a level the market can sufficiently absorb.

Therefore, unless oil prices surge to $120-140 per barrel, current interest rate hikes are not expected to act as an excessive negative factor on stock prices.

It was advised that since there is a possibility of the stock market declining again in the second half of next year, a strategy of reducing stock holdings should be adopted using this rebound.

Even though stock prices are currently much cheaper, aggressive buying by foreign investors has not yet appeared.

Looking at foreign investor trading trends, it tends to be more favorable for returns to buy stocks after 'Halloween Day' at the end of October and hold them from November until May of the following year.

Biotech companies are highly sensitive to interest rates, making stock price increases difficult when rates are high.

Given the nature of the biotech industry, which requires massive funds for Phase 3 clinical trials, a decline in interest rates leads to improved funding conditions. Therefore, if a real interest rate and 10-year Treasury yield decline are confirmed during a US economic slowdown, a rebound in biotech stocks is highly probable.

As a rotation into undervalued blue-chip stocks is expected amidst the current semiconductor range-bound market, investment considering these two principles is necessary.

Due to the widening gap in naval vessel acquisition between the US and China, the South Korean shipbuilding industry, capable of building warships, is expected to benefit. The ESS and battery industries, which must address power bottlenecks in data centers, are also projected to continue structural growth until early the year after next.

South Korea is the only country capable of building warships, including nuclear submarines and destroyers, and its shipbuilding industry can benefit from this hegemonic competition.

Furthermore, as data center construction increases, the strategic value of South Korean companies related to ESS and batteries will grow to address the resulting power bottlenecks, and this structural growth, which will continue until early the year after next, should be noted, it was explained.