Bond yield shock sends KOSPI lower… experts say “short-term supply digestion, no further decline”

Oh Hyun-jin, head of Luchain Invest, judged that the recent KOSPI correction could have occurred even without the bond yield issue, calling it merely a trigger for a short-term adjustment. He viewed foreign investors' short selling of Samsung Electronics as technical profit-taking, and read the decline in the lending balance as a positive signal.

He added that this could be interpreted as them being ready to flip back to net buying at any time the market turns.

She said a technical correction followed an 11% rise last week, and analyzed that the market is forming a double bottom rather than a V-shaped rebound.

Sung explained that this phenomenon is a temporary correction and unlikely to develop into a medium- to long-term downtrend. Supply zones could hinder further gains in the short term, but she judged that the market is already going through a sufficient adjustment.

She particularly stressed that the formation of a double bottom can be read as a positive signal laying the groundwork for a future rebound.

Oh Hyun-jin voiced concern that if the won strengthens sharply, it could make foreign investors hesitant to buy Korean shares. He explained that if the pace of the won's appreciation is fast, the incentive for new foreign inflows could decline. He also raised concerns about downward revisions to earnings for export stocks that had benefited from the high exchange rate.

Sung Sun-hwa, by contrast, saw a stronger won as potentially positive for foreign inflows, explaining that Korean shares could look relatively undervalued as a result.

While the two experts gave opposing views on the impact of a stronger won, they agreed that exchange rate movements will be an important variable for foreign investor sentiment.

Oh Hyun-jin assessed a cancellation of this size as appropriate, and expects it to secure downside rigidity since on-market buying is scheduled through November 19.

SK hynix's decision is read as an effort to raise shareholder value while also defending the share price against decline amid market uncertainty.

Accordingly, there are high expectations that a policy of at least the same scale as SK hynix's, such as share cancellation or dividends, will follow. This is expected to act as both downside support and an upside momentum factor for Samsung Electronics' share price.

On SK hynix's decision to buy back shares worth 40 trillion won, Sung Sun-hwa assessed that the amount, equal to about 3.3% of issued shares, is enough to lift the share price. The cancellation is expected to improve earnings per share (EPS) by about 3% or more for shareholders.

Buying is scheduled to run for three months from August 20 to November 19, and steady purchases during this period are expected to support the downside and guide a stable trend.

Sung stressed that such planned buybacks and cancellations will not only raise shareholder value but also send a positive signal to the market.

This strategy can be read as a long-term approach to enhancing corporate value, beyond simple short-term share price support.

The main cause cited was an imbalance in U.S. Treasury supply and demand, with Japanese and Chinese selling of U.S. Treasuries having an impact. The increase in bond issuance by hyperscale companies was also pointed to as a factor affecting the Treasury market.

Sung Sun-hwa expects the physical therapy regulations tightened from July to have a positive effect on insurers' earnings. This is because the new managed-benefit system clearly sets per-person limits on physical therapy.

Through this tightening, net income for the three major insurers is expected to improve by roughly 80 billion won, which is seen as contributing to a turnaround in the core earnings of the insurance business.

Oh Hyun-jin expressed expectations that policy factors such as the KOSDAQ promotion-demotion system, the clinical fund and the national growth fund could partly drive pharma and bio stocks. With details of the KOSDAQ promotion-demotion system scheduled for announcement in September, interest in related industries is expected to rise.

However, he warned that volatility risk in individual stocks could remain a burden, and proposed holding part of a portfolio through ETFs (exchange-traded funds). This is read as a cautious approach to capturing growth opportunities in the pharma and bio sector amid high volatility.

He viewed positively the confirmed improvement in operating profit at KOSDAQ companies in the first half, and analyzed that the current correction is a digestion phase.

He forecast that once the KOSDAQ index corrects in the 800-point or late-700-point range, it has the strength to break above 900 points, placing weight on the likelihood of a rebound after the correction.

Given the slowing U.S. economy, rate holds or cuts are likely, which she explained would create a positive investment environment for pharma and bio companies.

However, she said the deterioration in investor sentiment caused by recent disclosure issues is a short-term burden, and expects it to improve by year-end.

Oh Hyun-jin saw short-term strength as possible but was uncertain whether it would continue.

Sung Sun-hwa, by contrast, expected gains centered on companies investing in research and development (R&D), and rebutted the claim that Korean stocks would be left out of overseas issues. She stressed that domestic companies have sufficient proprietary technology and growth potential.

Oh Hyun-jin assessed that the construction sector has fallen sharply from levels that were previously hard to approach due to price burdens, and has only just begun to lift its head, meaning fundamental burdens have been nearly resolved. He cited as drivers of a renewed rise in the sector the possibility of Team Korea participating in overseas nuclear power contracts, and growing demand for semiconductor cluster and data center construction.

He also expects the government's push to expand housing supply and redevelopment and reconstruction momentum to have a positive impact on the sector.

He analyzed that these combined factors have the potential to drive earnings improvement and share price gains in the construction sector.

With no action from North Korea related to a summit at present, he said speculative approaches driven by short-term inflows of funds should be approached with great caution.

He assessed that it is hard to see anything beyond simple expectations for now, and advised that if investing, one should approach with a disciplined trading strategy such as setting a stop-loss price.