Focus on Performance and Growth Over Bond Yields, Investment Strategy for Foreigner-Led Market

SK Hynix announced after market close that it would acquire 40 trillion won worth of its own shares and cancel all of them. This is considered a strong positive factor for securing stock price stability and enhancing shareholder value. However, some analyses suggest that its impact as a short-term stock price driver may be limited.

The current market is driven by foreign investors, and such a market tends to be tedious and slow. Therefore, experts advise that an investment strategy focusing on time, rather than short-term gains, is crucial. Pursuing short-term profits impatiently can increase the risk of account losses, so a patient approach is necessary.

The won-dollar exchange rate continues to decline, reaching around 1,398 won, which is a significant factor in anticipating foreign capital inflow. With this year's economic growth rate projected to be in the mid-3% range, the exchange rate is highly likely to enter the 1,350 won range. The depreciation of the won creates an attractive investment environment for foreign investors, raising expectations for the revitalization of the domestic stock market.

When the KOSPI index is below 7,000 points, it should be seen as the best opportunity to buy key leading stocks and secondary leading stocks. A recovery to 7,000 points signifies entry into a full-fledged bull market, allowing for a positive outlook on the market. Therefore, investors should shed impatience, calmly analyze the market, and seize buying opportunities. Establishing clear investment principles and consistently practicing them is important.

The primary reason for the recent two-day decline in the domestic index is attributed to rising US bond yields. The end of the 60-day truce with Iran heightened concerns about sustained high oil prices, which in turn fueled inflation fears and triggered an increase in government bond yields. External geopolitical factors and macroeconomic variables thus directly impact the domestic stock market.

Rising bond yields are increasing the interest burden on hyperscalers (companies operating large-scale data centers). Concerns that this increased burden could lead to investment contraction are cascading through the market. Large-scale investments by technology companies have a significant impact on the overall economy, so a decline in their investment sentiment could negatively affect related industries such as semiconductors.

Although rising bond yields raise concerns about hyperscaler investment contraction, investment in the market's competitive environment is inevitable regardless of interest rate levels. In particular, the strength of the semiconductor industry, including DRAM and NAND, is bound to continue. This suggests that the current market adjustment is only temporary, and there is no change in the fundamental growth of the semiconductor industry. Companies are expected to continue investing to secure competitive advantages.

Negative factors already widely known and exposed to the market no longer act as market variables. What is important is not new negative factors, but opportunities for existing ones to be resolved. In particular, the only way to stabilize government bond yields is the end of the Iran war and the consequent stabilization of oil prices. Resolving these external variables is expected to alleviate market uncertainties and lead to a stable trend.

Despite external market uncertainties and various negative factors, the ultimate determinant of stock prices is a company's performance and growth potential. It is the common opinion of experts that when an undervalued stock highlights high growth potential, its price will inevitably rally and show an upward trend. The current South Korean stock market is absolutely undervalued at a P/E ratio of 5x, making investment in companies with both performance and growth potential effective.

A market led by foreign investors typically does not move quickly, showing a gradual recovery. In this process, foreign investors tend to shake the market to prevent individual investors from easily following, thereby taking away buying opportunities. Therefore, this rally is also likely to show slow, hesitant movements rather than sudden surges, so a long-term perspective is important.

Although large-scale foreign selling has recently occurred, it is likely a short-term adjustment rather than a trend departure. Foreign supply and demand show a pattern of increasing lows and highs by repeatedly buying and selling. Although there was short-term selling amounting to 3.7 trillion won, this is a temporary phenomenon, and buying is likely to re-enter the market the next day. Investors should understand these characteristics of foreign supply and demand and respond from a long-term perspective.

Stocks that previously led the market, such as shipbuilding or power equipment, have already seen significant gains, so it is advisable to exclude them for now. Instead, new leading stocks are highly likely to emerge in the semiconductor, securities, secondary battery, and physical AI sectors. In particular, a rise in the semiconductor sector is essential for an overall market upswing, so investment strategies should focus on these sectors. The ability to select leading stocks in line with market changes is crucial.

The possibility of SK Hynix's 40 trillion won share cancellation and the combined approximately 300 trillion won shareholder return policies from Samsung Electronics and SK Hynix are analyzed to be very significant positive factors for the market. Such large-scale shareholder return policies are seen as more than just simple news; they can strongly boost market investor sentiment. Companies' proactive efforts in shareholder returns can increase the attractiveness of the domestic stock market and facilitate foreign investment inflow.

As seen in the cases of Samsung Electronics and SK Hynix, foreign investors employ a staggered buying strategy, continuously accumulating shares when prices fall. In Samsung Electronics' case, foreign investors secured a large stake below 50,000 won, making substantial profits. Like this, foreigners maximize profits through an accumulation strategy, steadily buying shares when prices fall rather than rapidly pushing them up. Individual investors should reference this and adopt a patient investment approach.

Currently, there are no clear leading stocks in the market, which limits the market's upward momentum. Despite many stocks with good performance and growth potential, prices are not moving due to a lack of aggressive buying from institutions or foreign investors. Therefore, individual investors need to let go of impatience and anxiety, take their time, confirm market trends and institutional/foreign supply and demand, and prepare and wait. Only when they move first can stock prices begin to rise significantly.

The electric vehicle (EV) market is recovering, and domestic secondary battery companies are entering the low-end LFP (lithium iron phosphate) battery market, strengthening their competitiveness against Chinese companies. Moves to curb China, particularly in Europe and North America, could also result in indirect benefits for domestic companies. Due to these positive factors, foreign accumulation is clearly occurring in the secondary battery sector. Therefore, continuous attention and focus on secondary battery-related stocks are necessary.