[Asia Economy Reporter Oh Ju-yeon] As the earnings announcement season for the fourth quarter of 2019 begins, the focus of the domestic stock market is expected to shift to corporate earnings announcements. Although KOSPI operating profits are expected to decline compared to the same period last year, the market's attention is already focused on the 2020 earnings turnaround, so the impact on the market due to profit decline is expected to be limited.
Hana Financial Investment forecasted that next week the KOSPI will show a neutral level of price movement, attempting to settle around last year's high point of 2250. The expected band was suggested to be between 2220 and 2270.
Researcher Kim Yong-gu said, "The consensus for KOSPI operating profit in Q4 is 28.6 trillion won, expected to decrease by 9.6% compared to the previous year. However, considering that the current stock price and valuation environment have already priced in a significant portion of the profit decline risk, the special nature of Q4 earnings variables that considerably mitigate the stock price impact, and that market investors have already shifted their focus to expectations for earnings improvement in 2020, unless the worst earnings shock materializes, the market impact from Q4 earnings variables is likely to be limited to a certain extent."
Researcher Kim explained that this year is likely to be recorded as the first year of earnings stability and confidence recovery in the stock market. However, he pointed out that the fact that the current stock price environment has already priced in a significant portion of the 2020 earnings recovery is a concerning point.
He judged that the stock price influence of well-known earnings underperformance or earnings surprises that are merely illusions is minimal.
Researcher Kim added, "This earnings season means focusing on assessing the possibility of fundamental earnings recovery in 2020 through reviewing earnings guidance and management roadmaps."
Considering the seasonality of the Lunar New Year holiday, he diagnosed that the export indicators in February are highly likely to function as a turning point.
He explained, "It is necessary to derive sector and stock alternatives based on earnings momentum judgment represented by the year-on-year growth rate that is not just a superficial growth like a 'glossy but inedible fruit,' but the 1-month (or 3-month) change rate of the 2020 annual and Q1 earnings consensus. IT (semiconductors, hardware) and Chinese consumer goods (cosmetics, hotels and casinos, media) are earnings safe zones that fit this context."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
