KOSPI Volatility in September, Expect Rebound in October

The KOSPI is showing a downward trend due to continuous selling by foreigners and institutions. In contrast, the KOSDAQ has maintained a relatively strong trend and has shown a shift towards individual stocks rather than the index since early August.

Currently, the KOSPI is down about 3%, and the KOSDAQ is moving around minus 0.4%, indicating the KOSDAQ's strength. Notably, yesterday (as of Wednesday's filming), foreigners, institutions, and individuals all engaged in selling, showing an absence of buying entities.

The CPI (Consumer Price Index) data to be announced on September 4th is expected to be a key variable for future interest rate policy. The market is likely to determine whether to raise interest rates after confirming this data, and it is analyzed that it is not a situation where rates can be raised unconditionally.

Recently, the 10-year Treasury yield rose to 4.8%, which could be interpreted as a danger signal, but some view this as a new benchmark for interest rates. Currently, opinions on interest rate hikes and freezes are sharply divided in the market.

One of the main reasons the KOSPI index is maintaining the mid-6,000 level is analyzed to be the repurchase of treasury shares of Samsung Electronics and SK Hynix by other corporations. Approximately 670 billion to 780 billion won worth of treasury shares are being bought daily, defending against downward pressure on the index.

To date, about 10.3 trillion won worth of treasury shares have been repurchased, with an estimated remaining repurchase amount of over 40 trillion won. These large-scale treasury share repurchases are expected to contribute to the KOSPI index moving within a box range without significant declines in the future.

While semiconductor stocks have been sluggish, consumer sectors such as cosmetics, medical beauty, and food & beverages have shown significant recovery, leading to a diversification of market portfolios. With the number of rising stocks expanding to over 1,000, the market is truly shifting towards individual stocks.

August export indicators also confirmed export diversification in various items beyond semiconductors, including cosmetics and machinery equipment. This is interpreted as a positive sign that market interest, which was concentrated in specific sectors, is now spreading across various industries, increasing market stability.

Among the sectors expected to show high earnings growth until 2027, secondary batteries, which have low market expectations, are projected to show the highest growth rate. This will be followed by domestic consumer goods sectors such as oil/chemicals, cosmetics, and medical beauty.

In particular, the price-to-earnings ratio (PER) of cosmetic-related stocks is less than 15 times, undervalued compared to the market average, making their low valuation burden an attractive investment point.

September, before the Chuseok holiday, will be the most volatile period for the market due to various variables such as employment indicators, inflation indicators, U.S. macro indicators, and war issues. In particular, major events such as the CPI announcement and the FOMC meeting are concentrated in September.

Historically, September has been a poor month for the stock market, so caution is needed. However, there is also a possibility that the market atmosphere will change as it enters the Q3 earnings season in October.

Analyzing past data, there is an interesting statistic that the greater the market decline in September, the higher the probability of a strong rebound in October. Based on the S&P 500 and Nasdaq, when they fell significantly in September, the monthly gain in October reached 85%.

The domestic KOSPI also shows a relatively high probability of rising in October at 67%, suggesting that if the volatility of September is overcome, a positive market trend can be expected in October.

Analyzing past statistics, there has been a strong tendency for a sharp rebound to occur in October when the market decline in September was larger. This can be interpreted as a phenomenon where oversold market conditions are alleviated, and bargain hunting inflows occur.

Furthermore, if interest rates are frozen at the September FOMC, the possibility of bond yields stabilizing increases, which is expected to have a positive impact on the overall market.

There is a possibility that oil prices will quickly fall to the $70s, and if oil prices drop so sharply, it will be difficult for inflation to remain high. This is a forecast that falling oil prices will ease overall upward price pressure.

Therefore, as the second half of the year progresses, inflationary pressure is likely to gradually ease, and price increases will subside, which could reduce the burden on monetary policy.

The Q3 earnings season is set to begin in October, and sectors with unexpectedly good earnings will attract attention. Diversification of sectors is actively occurring, including secondary batteries, energy, oil/chemicals, machinery equipment, and previously strong sectors like cosmetics and medical beauty.

This suggests that earnings improvements are appearing in various fields, not limited to specific sectors. In fact, the KOSPI's Q2 earnings surprise ratio reached 62%, showing the solid earnings trend of domestic companies.

The KOSPI's average PER (Price-to-Earnings Ratio) over the past 8 years was 10x, but the current KOSPI PER is around 8x, undervalued compared to the historical average. Even calculating based on a PER of 10x, the expected rate of return reaches 10%, which is considered more attractive for investment than US markets like Nasdaq or S&P 500.

While the US market faces potential currency exchange losses and high PER burden, the KOSPI is in a period where fundamentals are supported by earnings. Therefore, it is analyzed that now is not the time to leave the domestic stock market, and the KOSPI offers a more favorable expected rate of return.

The performance of export stocks is more significantly influenced by price (P) and volume (Q) growth momentum than by exchange rate fluctuations. Domestic export companies are improving their operating profit margins through P (price) increase momentum, which can fully compensate for the effect of a falling exchange rate.

In fact, domestic companies are conservatively setting their earnings guideline exchange rates at 1,350 to 1,360 won, so the negative impact of the current exchange rate level on corporate earnings is expected to be limited.

Since price increase momentum can offset the exchange rate effect and drive the performance of export companies, there is no need to worry about export stocks solely due to a falling exchange rate.

CEO Kim Ji-hoon operates a subscription model called 'Billions Campus' to provide investment education services. Through this subscription model, daily market analyses are delivered, and investment ideas and insights are continuously provided via KakaoTalk. Furthermore, offline meetings are planned for October, aiming to communicate with investors and provide information in various ways.