Skip to content
  • KOSPI 2792.78 -41.51 -1.46%
  • KOSDAQ 918.48 -24.37 -2.58%
  • KOSPI200 371.19 -4.89 -1.30%
  • USD/KRW 1193.6 3.20 0.27%
  • JPY100/KRW 1,049.36 5.20 0.50%
  • EUR/KRW 1,353.54 6.78 0.50%
  • CNH/KRW 188.04 0.39 0.21%
View Market Snapshot
Markets

Kospi to resume rally to fresh high in H1 2022

Semiconductor, environment, content sectors are bullish, but cyclical stocks may underperform

By Oct 24, 2021 (Gmt+09:00)

Hana Bank headquarters' dealing room in Myeong-dong, Seoul
Hana Bank headquarters' dealing room in Myeong-dong, Seoul

South Korean stocks are likely to resume rallies in the first half of 2022 with the main Kospi to hit a fresh record high although the local markets have been suffering from worries about stagflation and the imminent monetary policy tightening in the globe, chief investment officers (CIOs) of major asset management companies and funds forecast.

The optimism backed by hopes of a gradual relaxation of restrictions against the COVID-19 came despite sustained concerns over a further tumble due to shrinking liquidity. Those CIOs said production activities are expected to normalize in line with global authorities’ push for a strategy of “living with COVID,” lowering inflation, while South Korean companies’ earnings are improving.

Eight CIOs out of 10 predicted the local shares to rebound on the living with COVID strategy even as the global monetary policy turns tighter, according to a survey by The Korea Economic Daily on Oct. 23. Six of them forecast the Kospi is likely to exceed the previous high of 3,302.84 to 3,400-3,500.

Production activities are expected to normalize, easing a supply shortage, from the next year when more restrictions are eased, those CIOs said. The current commodity prices are around their peaks, they added, indicating those negative factors may be resolved next year.

“Stocks are expected to see a strong rebound thanks to healthy corporate earnings if inflationary pressure eases and the US Federal Reserve gradually tightens with sufficient communication with the market,” said Shinhan Asset Management’s CIO Park Tae-hyung.

Still, the markets are likely to stay in a range rather than to rise as the upcoming Fed’s step to scale back asset purchases and worries about stagflation – rising inflation with slowing growth – will put pressure on the Kospi.

“The fourth quarter is a time to wait and see the market. Investors need to focus on risk management, said NH-Amundi Asset Management’s Ko Soong-chul.

The survey participants expected the chipmakers, the environment-related sector and the contents business to lead strength in the overall markets. On the other hand, cyclical stocks such as steelmakers may underperform as commodity prices are expected to decline.

SEMICONDUCTOR SHARES TO REBOUND IN Q2

Shares in chipmakers are predicted to start rebounding from the first quarter at the earliest or the second at the latest, leading gains in the Kospi, according to the survey. The semiconductor industry expects its cycle to rebound in the second half of next year.

“DRAM prices will stay weak until the second half of next year and then try to rebound. But stock prices are likely to rise from summer because they usually reflect business conditions about a quarter earlier,” said BNK Asset Management’s CIO Ahn Jung-hwan.
Kospi to resume rally to fresh high in H1 2022

Many of the CIOs said the recent worries about stagflation were excessive.

“Surging commodity prices and logistics crisis hurt corporate profitability, but that is temporary. Earnings are expected to show strong growth as the living with COVID will strategy gradually normalize the global supply chain,” said Hanwha Asset Management CIO Song Tae-woo.

The Fed’s tightening is unlikely to affect the markets much, the participants predicted.

“The markets have digested worries about the Fed’s tapering to some extent. The Fed will not move so quickly that it shocks the market since it suffered side effects in 2013,” said Koo Yong-duk, head of equities at Mirae Asset Global Investments.

CONTENTS AND ECO-FRIENDLY SECTOR

Six participants of the 10 picked eco-friendly sectors as their favorites.

“Huge investment in eco-friendly infrastructure is expected since global major countries pledged to achieve carbon neutrality by 2050,” said a CIO, who asked not to be identified.

Mirae’s Koo said it is a good time to buy stocks related to hydrogen and wind power, saying “countries across the globe are likely to unveil various supporting measures ahead of the UN Climate Change Conference (COP26) to be held on Oct. 31.”

Five CIOs recommended buying stocks in the entertainment and game sectors.

“Local contents companies are ready to compete in the global market now,” Shinhan’s Park stressed. “Since values of content producers are rising more than ones of platforms, the content sector may be a beneficiary of regulations on big-tech.”

Most of the participants preferred growth stocks to value stocks in a view that the recent weakness in the growth stocks provided chances to buy them on dips.

“A rate hike in the US next year is a factor that has already been reflected,” NH-Amundi’s Ko said. “Buy structural growth stocks that have been suffering corrections.”

Cyclical stocks are expected to underperform the overall market, the survey participants said. Stocks whose prices have been surging on soaring commodity prices are at risk as easing inflationary pressure is likely to drag their earnings lower, they added.

Many of them said investors need to manage risk in the secondary battery sector. Many companies in the sector have yet to make a profit while intensifying competition is likely to lead to price cuts, they added.

Write to Sung-Mi Shim and Eun-Seo Koo at smshim@hankyung.com

Jongwoo Cheon edited this article.
Comment 0
0/300