September Market Correction to Present Buying Opportunity

First is the market's confidence in memory semiconductor prices next year, and second is the resolution of selling pressure due to pension funds' rebalancing.

Stabilization of memory semiconductor prices was cited as a key factor to improve overall investment sentiment in the IT sector. It was also analyzed that the mechanical selling by pension funds must subside to reduce overall market supply and demand uncertainty and gain momentum for an index rise.

He analyzed that this is related to individual customer deposits falling below 100 trillion won.

Individual investors have already realized significant profits in memory semiconductor stocks, and with the high likelihood of selling pressure for capital gains tax avoidance at year-end, individual influence is expected to decrease.

Ultra-large-cap stocks, which move the index, are expected to consolidate and take a breather for the time being. Lee Hyuk-jin, Team Head, diagnosed that while ultra-large caps rest, a stock-specific market is highly likely to continue, focusing on other stocks.

The forecast suggested that movements of individual stocks concentrated in specific sectors or themes may become prominent until year-end. This indicates that investors should focus on identifying individual stocks rather than the overall index.

He presented the opinion that, looking 12 months ahead from the current point, now is an appropriate time to buy stocks. The judgment is that a short-term correction will provide long-term investment opportunities.

Lee Hyuk-jin, Team Head, pointed out that there is an illusion in the overall KOSPI price-to-earnings ratio (PER) indicator. He explained that excluding memory semiconductor stocks, the PER of the KOSPI non-semiconductor sector is currently approaching a short-term bottom.

This means that while the high valuation of the semiconductor sector makes the overall KOSPI PER appear high, many other stocks have already undergone sufficient correction and reached attractive price levels. He analyzed that these non-semiconductor stocks are likely to lead the market rebound in the future.

Lee Hyuk-jin, Team Head, mentioned that confidence in the earnings outlook for the memory semiconductor industry in the second half of the year is decreasing, and emphasized the need to make investment decisions based on the price-to-book ratio (PBR). He argued that the PBR indicator is more meaningful in a situation where the peak of the current upcycle is uncertain.

He added that suspending purchases of large-cap semiconductor stocks and adopting a PBR strategy, which seeks out stocks undervalued relative to their asset value, is effective at this time.

Lee Hyuk-jin, Team Head, pointed out that the adjustments to the earnings forecasts for the two major memory semiconductor companies have been minimal. He found it strange that despite the exchange rate falling by nearly 10%, there are hardly any reports lowering the earnings forecasts for semiconductor companies.

This phenomenon runs counter to the general correlation that a strong won can negatively affect the performance of export companies, raising questions about the reliability of semiconductor earnings forecasts.

In past memory semiconductor cycles, the stock price bottom was around PBR 1x and the top was 2x, but now long-term contracts and shareholder return policies act as supporting factors for the bottom.

With Samsung Electronics' PBR expected to be around 1.5x next year, he judged that the possibility of further sharp declines in the stock price has decreased at this level.

Lee Hyuk-jin, Team Head, presented an empirical rule that past leading stocks purchased in January should have their holdings reduced around August. Examining cases of past market leaders such as Kakao, EcoPro, and Hanmi Semiconductor, few stocks recovered their year-end highs after rebounding in late August to early September.

This suggests that it may be more advantageous to look for investment opportunities in other sectors rather than the semiconductor sector in the short term.

He analyzed that when V-KOSPI is above 50, mechanical selling by foreigners occurs, and if it falls from 50 to the 30s, net selling stops and a slight inflow is likely.

He particularly predicted that foreign buying intensity would strengthen if V-KOSPI drops below 30 points. He explained that the unusually high volatility in the Korean stock market recently was a factor triggering foreign selling.

V-KOSPI is an indicator of market instability, and a lower number suggests a more stable market sentiment, increasing the likelihood of foreign investment. Therefore, the future trend of V-KOSPI will be an important gauge for foreign supply and demand.

In the case of Samsung Electronics, which has already shown high return rates, the effect of additional stock revaluation may be limited.

While shareholder returns clearly have a positive impact on corporate value, he believed it is difficult to significantly boost stock prices without fundamental earnings improvement or securing new growth engines.

Therefore, he emphasized focusing more on changes in corporate fundamentals rather than expecting stock price increases solely from shareholder returns. For companies that have already implemented high-level return policies, the stock price boosting effect of further expansion of returns may gradually dilute.

Lee Hyuk-jin, Team Head, explained that the cluster construction timelines for Samsung Electronics and SK Hynix coincide with this period.

He predicted that the robust free cash flow of big tech companies provides sufficient investment capacity for memory semiconductors, which will create opportunities for related material, parts, and equipment (SooBuJang) companies.

Lee Hyuk-jin, Team Head, stated the need to pay attention to the bio-healthcare sector. This sector tends to see stock prices rise relatively when semiconductors are resting, and exhibits a correlation where the peak of oil prices coincides with the trough of the bio sector.

With expectations of technological innovation through new drug development momentum recently, he analyzed that bio-healthcare could become a promising 'empty house' when investors look for alternatives outside of semiconductors.

He explained this is due to the disease's characteristics, which are suitable for verifying the effectiveness of new treatments.

In particular, he interpreted the intravenous clinical trial of Keytruda SC (subcutaneous injection) formulation as a prelude to targeting the lung cancer market in the future, a strategic move for expansion into a larger market.

He explained this is because warmth is currently spreading across the beauty market, and as valuation burdens on specific leading stocks increase, there is a possibility of sector rotation.

His view is that investors should not only focus on leading stocks but also pay attention to second-tier stocks within the sector that are relatively undervalued or have growth potential. The overall recovery of the beauty market is expected to have a positive impact on the stock prices of these companies.

Citing the case of stock decoupling between Hyosung TNC and China's Huafeng, he explained the importance of analyzing the stock price discrepancy between customers and suppliers.

This can be an effective analytical tool for identifying supply-demand distortions or 'empty house' stocks. By looking at the stock price trends of overseas peers, one can gain insight into whether domestic companies are undervalued or predict future stock price directions.

He proposed a strategic approach to discover hidden investment opportunities by comparing and analyzing global market trends and corporate fundamentals.