CEO Seol Jae-hwan Forecasts Entry into Earnings-Driven Market and Second Rally from AI Industry

Nvidia's earnings announcement is scheduled for 5:30 AM the day after tomorrow, with anticipated revenue of $91 billion (approximately 126 trillion Korean Won), double that of last year. Despite these expectations, Nvidia's stock has recently fallen for seven consecutive days, entering its longest adjustment period since 2022.

SK Hynix bought back 1 trillion won worth of shares, and Samsung Electronics bought back 500 billion won, totaling 1.5 trillion won supporting the market. As a result, the composite index showed signs of forming a 6,500-point support level. Analysis suggests that these buybacks effectively absorbed profit-taking by foreign investors, preventing further market decline.

It is argued that the semiconductor industry is shifting its paradigm from a 'cycle industry,' which repeatedly fluctuates with economic cycles, to an 'order-based industry.' This is due to the surge in demand for DRAM and HBM with the expansion of AI data centers, leading to an increase in long-term supply agreements (LTAs). This is expected to enable semiconductor companies to secure stable long-term revenues rather than one-time demand, thereby limiting concerns about sharp stock price declines and ensuring downside rigidity.

In the past, semiconductors had high price volatility due to imbalances in supply and demand, but now, the structural increase in demand driven by AI technology development is enhancing market stability. Therefore, a sharp decline in stock prices as seen in the past is unlikely to occur.

This change, along with the stabilization of corporate earnings, also demands a new approach from investors. Rather than merely anticipating a rebound due to economic recovery, attention should be paid to companies achieving stable growth through long-term contracts.

CEO Seol Jae-hwan predicted that a 'second rally' would begin after an adjustment period for stocks that led the initial surge, such as semiconductors, materials, components, and equipment (SooBuJang), and transformers. This second rally will feature an earnings-driven market, with a focus on companies expected to show earnings turnarounds that have not yet seen significant stock price increases.

He particularly emphasized the need to pay attention to stocks accumulated by institutional investors in preparation for the 'rate of return game' that will continue until the end of this year. Institutional accumulation can be a significant signal indicating the potential for future earnings improvement in those stocks.

The market is currently transitioning to a healthy upward trend based on earnings, and investors should evaluate the intrinsic value and growth potential of companies rather than engaging in speculative approaches centered on past theme stocks. This is essential for pursuing stable returns from a long-term perspective.

CEO Seol added that selective investment is crucial in response to these market changes. He advised that it is time to thoroughly analyze companies expected to accelerate earnings improvement in conjunction with the growth of the AI industry.

Even in difficult market conditions, the 'reasons to hold' an investment were identified as earnings, supply and demand, and alignment with the prevailing trend. It was particularly emphasized that investing in companies aligned with the current AI industry revolution is crucial.

Stocks accumulated by institutional and foreign investors are likely to satisfy these three conditions, so their movements should be closely watched, he added.

The case of Samsung Electro-Mechanics, where BlackRock announced a 5% stake purchase, was used to illustrate the importance of foreign accumulation. On February 12, when BlackRock's disclosure was made, Samsung Electro-Mechanics' stock price was 320,000 won, but it surged to 2,400,000 won by June 19, just four months later, recording an 8-fold increase.

Although it has fallen 43% from its peak, the stock price remains 4 times higher than at the time of the disclosure, clearly demonstrating the long-term impact of foreign accumulation on stock price appreciation.

Candidates for new market leaders are identified as industry-leading stocks that have not seen significant price increases despite active accumulation by institutions and foreigners. Among these, three stocks are industry leaders that have seen consistent accumulation, and two have already announced stake purchases of over 5%.

Furthermore, these companies are attracting hundreds of billions of won in large-scale investments in the form of redeemable convertible preferred shares (RCPS), suggesting they have secured potential growth engines.

Stocks with these characteristics are highly likely to lead the market's second rally, and accumulation by institutions and foreigners can be interpreted as a strong signal of improved earnings.

A forecast suggests that the composite index will stabilize until at least the end of September, with institutional investors continuing their stock buybacks. SK Hynix is expected to buy 1 trillion won daily, and Samsung Electronics 500 billion won, with this large-scale buying securing the index's downside rigidity.

Additionally, it is analyzed that there is a low probability of significant market headwinds before the US midterm elections, indicating a continuation of stable trends.

It was assessed that the stock market is currently transitioning from an abnormal speculative phase to a gradual normalization process. Therefore, investors were warned to refrain from leveraged investments related to Samsung Electronics and SK Hynix, or gambling-like short-term trading.

CEO Seol emphasized the importance of a stable investment strategy, asserting that building an earnings-based, normalized investment portfolio is essential for long-term survival in the stock market and for ensuring future prospects.