Senior Managing Director R Raises Caution on KOSPI Rally, Advocates for Prudent Portfolio

Senior Managing Director R expressed concern about the recent change in market sentiment, where some investors are making 'all-in' investments or prematurely predicting a rise to 7,500 points after a small increase. He emphasized, “We barely survived almost dying, and it’s only been about 1-2 weeks, or 8 business days. The current situation is not yet a stage to be relieved.”

Senior Managing Director R advised that now is the time to be vigilant and carefully construct one's portfolio, stating, “If you build your portfolio well now, you will continue to make profits.”

Senior Managing Director R analyzed that the basic tendency of individual investors is to 'buy'. He said, “As I increase contact with individual investors, buying is their default. If you leave them alone, they just keep buying. They buy without even realizing it.” He revealed that he had clearly warned close acquaintances, yet observed a tendency for them to continuously increase their stock positions.

He pointed out that this phenomenon leads to a pattern where individual investors continue to buy, even during a market decline, with the expectation that 'it will still go up'.

Senior Managing Director R emphasized that the current market situation is a very critical turning point and warned that if investors fail again and get caught at this time, it will be difficult to recover. He asserted, “This is a very important timing, and if you get caught again here, there will be no answer.”

He stated that if individual investors incur losses again, this year's stock market would effectively be over, and he himself would advise them to cut losses and quit. Senior Managing Director R added that he hopes individual investors will deal wisely with this critical moment.

Senior Managing Director R interpreted the inflow of foreign buying and the decrease in individual investors' selling as positive market signals. He evaluated, “Foreigners are buying, which is a very good picture,” and mentioned that an ideal scenario would be foreigners buying around 80 trillion won and individuals selling around 30 trillion won.

However, he added that individual investors still bought a large amount, implying that they hold a large volume at high price levels. This suggests that the trapped volume of individual investors could become a burden when the market recovers.

Senior Managing Director R assessed that the current market is not yet in a stable upward trend. He pointed out that although some mention the KOSPI 7,500 line, the market cannot be considered stable even if it reaches that level.

According to his analysis, since the 60-day and 120-day moving averages are still in a downward trend, it is not safe until a golden cross occurs where the 20-day moving average breaks through them. This golden cross is expected to take about two months to occur, and the index level at that time is projected to be around 7,200 points.

In conclusion, Senior Managing Director R diagnosed the current market situation as an unstable transition period, emphasizing that investors should closely monitor indicators and respond cautiously.

Senior Managing Director R recommended that investors learn to grasp the bigger trend through weekly charts rather than daily fluctuations. He explained, “I recommend you get used to looking at weekly charts, not daily ones. When you look at weekly charts, you can see the bigger trend.”

He particularly emphasized that when viewing useful indicators for grasping big trends, such as the Ichimoku Kinko Hyo, on a weekly basis, the point at which the weekly 20-week moving average breaks through is very important, adding that capturing such moments is key to successful investing.

Senior Managing Director R assessed that while the KOSDAQ market is currently maintaining an upward trend, it is merely at the point of having 'survived a crisis', urging investors to remain vigilant. He said, “You can just think of it as having survived a crisis.”

He pointed out that investors currently making profits should not think they did exceptionally well, and even if they lowered their average cost through dollar-cost averaging, they should recognize that the original situation of being 'caught' was inherently unfavorable. This is interpreted as a warning that the market has not fully recovered and risks still exist.

Senior Managing Director R predicted that the Nasdaq index is likely to break through the 27,000 level by this Thursday or Friday. He explained that judging by the intraday movement, the Nasdaq shows an upward trend, but feels hesitant due to the absence of specific announcements.

He forecasted that if the Nasdaq surpasses its previous high of 27,190 from June 1st and rises above the 27,000 level, the domestic stock market would also not fall significantly and would experience a positive impact.

Senior Managing Director R defined the essence of exchange rates as a 'simple exchange ratio', arguing that the absolute numerical value of the exchange rate itself holds no inherent meaning. He explained that whether the won-dollar exchange rate becomes 900 won or 20,000 won, if it changes gradually over a sufficient period, it does not significantly affect the economy of that day.

He added that what is important is the 'speed' of exchange rate changes, and this is why central bank governors and authorities always emphasize the importance of speed. This suggests that rapid exchange rate fluctuations can shock the market.

Senior Managing Director R argued that investors in the stock market must quickly realize that price indicators such as candlestick charts and numbers are 'illusions', not reality. He pointed out that investors are in a contradictory situation where they try to earn money through these illusions to sustain their livelihoods in reality.

The core message was to understand the essence of the stock market, not to be bound by visible indicators, and to invest based on real value.

Senior Managing Director R stated that US Treasury yields are determined not by ordinary investors, but by market experts, the 'savvy ones'. He explained, “US Treasury yields are truly decided by the savvy ones sitting together.”

He added that these experts determine Treasury yields by sensitively reflecting not only fundamentals but also market liquidity conditions, which significantly impacts the overall flow of funds in the market.

Senior Managing Director R predicted that former President Donald Trump might back down from negotiations with Iran and transition back to a negotiation phase by this weekend. He said, “Perhaps by this weekend, Trump might back down a lot. He might just say he’ll negotiate again.”

However, despite this possibility, he noted that the reaction of West Texas Intermediate (WTI) crude oil prices has been minimal so far. He likened the situation in Iran to Gaza, describing it as complex and difficult to predict.

Senior Managing Director R argued that the decisive difference between SK Hynix and Samsung Electronics lies in the 'cash' held by Samsung Electronics. He explained that Samsung Electronics has always earned a lot of money, and even when it faced difficulties in HBM (High Bandwidth Memory) production and incurred deficits, it still held cash.

In contrast, he pointed out that just before SK Hynix began earning significant profits from HBM, it was a period when the SK Group was scaling down its businesses, analyzing a significant difference in financial flexibility between the two companies.

Senior Managing Director R mentioned that foreign investors have a negative perception of the corporate governance structure of Korean companies. He said, “The perception embedded in the sentence, 'those outsiders say they have corporate governance,' is that perception.”

He pointed out that foreigners perceive Korean companies as having hidden elements that make them difficult to analyze financially, and this is one reason why investment giants like Warren Buffett do not approach the Korean market. This is interpreted to mean that a non-transparent governance structure provides uncertainty for foreign investors.

Senior Managing Director R presumed that the background of Singapore's sovereign wealth fund Temasek contacting the Korean government was related to tax discussions. He analyzed that it was unlikely to be for general investment purposes, given that foreigners do not need to meet the government to purchase stocks.

However, he added that uncertainty remains as the specific tax issues or other agendas discussed are unknown. He emphasized that the fact that there was government contact itself is undeniable.

Senior Managing Director R stated that BlackRock effectively acts as a 'public institution' in the US financial market. He explained that BlackRock replaces the Federal Reserve's (Fed) direct market intervention.

BlackRock sometimes takes over roles that were originally performed by the New York Fed, which he explained is similar to how Japan intervened in the market in the past when setting up the Nikkei 225 ETF by providing funds to asset management companies.

Senior Managing Director R strongly criticized the method of issuing bonds backed by GPUs (Graphics Processing Units) as assets, calling it an 'almost fraudulent' and excessive measure. He believes this method is too extreme and expressed concern about the US authorities easing it.

He pointed out that even though it has not yet passed, the mere fact that such financial products are being pursued could place an undue burden on the market.

Senior Managing Director R assessed that governments worldwide are resuming 'money-printing' policies. Although he disapproves of this situation, he predicted that asset prices are bound to rise if money is released.

Senior Managing Director R mentioned that those in power are showing a willingness to release money again to postpone pain, expressing his personal dissatisfaction but acknowledging the realistic flow of the market. This provides significant implications for the future direction of the asset market.