Market Indifferent to Positive News: Factors Hindering Stock Market Rally and Investment Strategy

The current market is generally struggling to sustain yesterday's upward trend, showing increasing signs of exhaustion. Although the index has risen by nearly 30% from its bottom, this upward momentum has not been maintained.

A lack of momentum regarding dividends and shareholder return policies is also a factor dampening market vitality. Additionally, the specific nature of Friday as a trading day tends to reflect in investor sentiment, leading to a contraction.

Individual investor confidence appears to have significantly dropped, and funds are observed moving from the stock market into banks. This fund movement continues despite bank deposit rates falling from the previous 5% range to the current high 3% range.

Stock market deposits have decreased considerably from their peak, currently standing at around 106 trillion won. This indicates a general decline in investor confidence.

Having experienced sharp stock market declines over the past one to two months, investors are fearful of further drops. The index's 5% plummet on Wednesday particularly exacerbated investor stress.

This psychological contraction occurs irrespective of market fundamentals and acts as a factor preventing investors from acting prematurely even when positive signals appear.

Even during the recent market downturn, biotech stocks showed robust performance, unaffected by interest rate concerns. If the market had declined due to stress and worries about interest rates, biotech stocks, which are more closely linked to interest rates, should have also fallen.

However, the strength of biotech stocks proves the robustness of the Korean market's fundamentals. This indicates a disparity between psychological factors in the market and the actual value of companies.

When viewing the index like a stock, there is supply pressure around the 7,500 point (PBR 6x level). While the supply is not significant up to this level, additional supply needs to be absorbed for a further rise.

Current valuations are still cheap compared to earnings, but a sharp rise, as expected by individual investors, is unlikely. Time and a recovery in investor confidence are needed for the index to climb.

The current market is projected to trade within a range, with the index bottoming between 5,500 and the upper 5,000s, and the top between 7,300 and the upper 7,000s. A sector-specific rotation is expected to continue within this range.

For an investment strategy, it is crucial to focus on undervalued sectors supported by strong earnings. Attention should be paid to individual stock and sector movements rather than a general market surge.

The current market exhibits a tendency to react strongly to negative news and not properly reflect positive news. This phenomenon can also be interpreted as a typical sign of entering a bear market.

While market participants' expectations linger at the past 9,000-point level, familiar negative factors like interest rates and various positive news items are mixed, increasing market uncertainty.

When evaluating interest rates, economic growth must be considered simultaneously. Current US GDP is robust, exceeding potential growth rates, so it is difficult to view growth as sluggish.

The Atlanta Fed's GDP data continues to be revised upwards. Therefore, there is doubt as to whether the interest rate burden is truly a negative factor, and there is disagreement between interest rates and economic growth.

A good company is one that consistently earns money, and a good stock is one that is cheap. However, it's crucial not to get bogged down solely by current valuation estimates but to focus on a company's performance.

Ultimately, the core of positive news lies in a company's ability to generate continuous profits through its performance. Investors should focus on companies with solid earnings rather than just looking for cheap stocks.

Sustained earnings improvement is a fundamental driver of increased corporate value, which can lead to stable returns in the long term.

In the current market situation, the ability to select stocks has become even more critical. The capacity to choose appropriate stocks according to market conditions and overall strategy is required.

Investors need to carefully examine short-term positive factors and adjust their portfolios accordingly.

Foreign investors perceive the Korean market much more comfortably now compared to a month ago. This can be seen as a positive factor in terms of foreign investor demand.

The attractiveness of the Korean market has also increased in terms of exchange rates and valuations. These changes alleviate the psychological burden on foreign investors regarding the Korean market.

Positive aspects of foreign investor demand still remain, potentially acting as an additional catalyst for market upside.

Recently, oil stocks have shown a gradual upward trend. Major oil companies like SK Innovation and S-OIL are exhibiting strength, influenced by positive refining margin trends.

Financial and insurance stocks tend to receive less market attention despite expectations for strong earnings. Investors need to pay attention to these defensive stock groups at this time.

Semiconductor leaders such as Samsung Electronics and SK Hynix are failing to sustain the trends seen in the US market. Despite SK Hynix ADR and Micron rising in the US market, this trend did not carry over to the domestic market.

This is likely because Samsung Electronics and SK Hynix already saw significant increases yesterday. Expectations for shareholder returns remain valid, but short-term upward continuity is lacking.

The current market has a strong tendency not to properly reflect positive news. While positive catalysts clearly exist, their impact on the market is limited.

This is either because market expectations have been excessively priced in, or overall market sentiment has cooled. It is uncertain when positive news will be reflected, and even current issues are not being reflected as market momentum wanes.

Investor psychological contraction, coupled with a general decline in market vitality, is a major reason why the market remains indifferent despite positive news.

Today, in the KOSPI market, Samsung Electro-Mechanics fell by 4%, and other major stocks like Hanwha Aerospace also showed weakness. In the KOSDAQ market, Alteogen, the top stock by market capitalization, dropped 6%, while EcoPro and EcoPro BM recorded declines of 4-5%. Robot-related and equipment stocks also struggled.

The overall market did not collapse, but the performance of top KOSDAQ stocks, in particular, appeared relatively weaker. However, the decline is expected to lessen somewhat as the afternoon progresses.

The profitability of data center operations in Korea has been proven, and data center investments are expected to move in a very positive direction going forward. For example, investing 30 billion won in a data center on the outskirts of Seoul could yield 100 billion won in profit within three years.

Such growth in data centers is a major factor triggering demand for memory semiconductors. Therefore, concerns about memory semiconductors due to data centers will only have a short-term impact.

In conclusion, while concerns about memory semiconductors may be reflected in the short term, the growth trend of data centers is unlikely to reverse the overall upward trend of the semiconductor industry.

While an increase in credit loan balances often accompanies rising indices, this can also be a negative factor that hinders the continuity of confidence in the rally. KOSPI credit loan balances historically rose from approximately 10 trillion won to a maximum of 30 trillion won, and currently stand at about 24 trillion won after adjustment.

KOSDAQ credit loan balances previously exceeded 10 trillion won but have now fallen to the 6 trillion won range. An increase in credit loans can be a short-term driver of index growth, but excessive increases can heighten market instability, requiring continuous monitoring.

Foreign selling pressure in the KOSPI market has somewhat decreased. This can be seen as a positive signal in terms of supply and demand. Foreign investors are particularly buying 34.9 billion won in the electrical and electronics sector.

This buying trend appears to be flowing into large-cap semiconductor stocks such as Samsung Electronics and SK Hynix. As a result, Samsung Electronics and SK Hynix showed increasing strength today.

Changes in foreign investor demand can significantly impact the overall market, especially the trend focused on large-cap stocks.