What is the Strategy to Respond to the Q2 Earnings Season?

[Asia Economy Reporter Song Hwajeong] As Samsung Electronics' earnings announcement on the 7th marks the beginning of the Q2 earnings season this year, attention is focusing on companies' Q2 performance. Given the low expectations for earnings due to the novel coronavirus disease (COVID-19), there is an opinion that it is necessary to pay attention to sectors with strong policy momentum and high expectations for future earnings improvement.

According to SK Securities on the 4th, the KOSPI net profit forecast, which was expected to reach 125 trillion won this year, has fallen to 91.4 trillion won, and the Q2 forecast has also been revised down from 24.1 trillion won to 20.5 trillion won. Compared to last year, the earnings of KOSPI-listed companies in Q2 are expected to decrease by 16.9%.

Han Daehoon, a researcher at SK Securities, said, "Since expectations for Q2 earnings are very low, it is necessary to consider policy and macroeconomic conditions together during this earnings season," adding, "Because liquidity is abundant, if policy momentum accompanies it, the possibility of capital inflow is higher."

Therefore, it is expected that interest in sectors with policy momentum and high expectations for future earnings will increase during this earnings season. SK Securities identified healthcare, telecommunications, machinery, and IT software as the relevant sectors. Researcher Han said, "Not only IT software and healthcare, which are currently playing leading roles, but also telecommunications and machinery sectors, whose Q2 and Q3 earnings estimates have been revised upward along with policy momentum, are worth paying attention to," adding, "Since the current stock market rebound is largely influenced by individual funds, if policy momentum supports expectations for earnings improvement, the concentration on these sectors will intensify even more."