[Good Morning Stock Market] "Supported by 'Exchange Rate' and Driven by 'Earnings'... Expecting a Gradual Rise in KOSPI"

Foreigners Net Buyers for 6 Consecutive Days
Exchange Rate and Earnings Environment Act Positively

Foreigners' Samsung Electronics Dividend Payments
High Reinvestment Potential... "Interest in Financial Stocks"

[Asia Economy Reporter Minji Lee] The KOSPI is showing an upward trend due to the return of foreign investors. The stabilization of the won-dollar exchange rate driven by strong exports and upward revisions of corporate earnings are believed to have stimulated foreign investors' demand.

◆ Sungkeun Kim, Researcher at Korea Investment & Securities = A gradual rise in the KOSPI is expected. Recently, the KOSPI has continued its rebound, with the biggest factor being the return of foreign investors. Over the past two weeks, they have net purchased stocks worth 2.3 trillion won, pushing the index to the 3,100 level. The factor influencing the return of foreign investors is the stabilization of the won-dollar exchange rate due to strong exports. Last month, exports excluding semiconductors showed a strong recovery, increasing by 17% year-on-year, and the won-dollar exchange rate fell to the 1,110 won level.

Expectations for earnings were also reflected. Looking at the intensity of foreign net purchases over the past five days, telecommunications services, semiconductors, distribution, and software sectors are at the top. These are sectors with upwardly revised earnings per share, with first-quarter earnings continuously being revised upward, and if the global economic recovery continues, this trend is expected to persist. The first-quarter and annual earnings of KOSPI-listed companies have been revised upward, estimated at 31.6 trillion won and 139.4 trillion won, respectively.

◆ Jaeseon Lee, Researcher at Hana Financial Investment = The domestic stock market is expected to become more sensitive to individual corporate earnings. Among these, a variable to watch is exchange rate volatility. This is because the increase in foreign dividend payments by Samsung Electronics (payment date on the 16th) could temporarily drive demand for the dollar. Last year, Samsung Electronics' year-end dividend included a one-time special dividend, exceeding the average level. The proportion of Samsung Electronics in the total dividends of listed companies also increased from 30% to 47%. The total amount of regular year-end dividends and special dividends paid by Samsung Electronics is 13.12 trillion won, with about 7.74 trillion won allocated to foreigners. Last year, the amount Samsung Electronics paid to foreigners was around 1.44 trillion won.

Focusing on the possibility of reinvestment by foreigners after dividend payments, attention should be paid to sectors with high dividend yields and upwardly revised first-quarter earnings forecasts. Traditionally, the financial sector has high dividend yields, among which insurance showed the most notable upward revision of 18.2 percentage points in first-quarter earnings estimates since March. Among 15 companies, 14 had their target prices revised upward, making it the sector with the highest upward revision ratio.

◆ Kyuyeon Jeon, Researcher at Hana Financial Investment = Global crude oil supply is gradually increasing. As the economy recovers and oil prices stabilize, oil-producing countries, led by the Big 3 producers?the United States, Saudi Arabia, and Russia?are highly likely to increase crude oil production.

At this month's OPEC+ (Organization of the Petroleum Exporting Countries (OPEC) and Russia-led major oil-producing countries cooperation body) meeting, OPEC member countries and non-OPEC oil-producing countries participating in the meeting agreed to gradually reduce production cuts from May to July. The United States is also expected to gradually increase crude oil production. However, since the U.S. Energy Information Administration (EIA) lowered its U.S. crude oil production forecast through the April energy outlook until next year, the production increase pace is expected to be moderate.

The fact that global crude oil supply is expected to be within a predictable range over the next three months reduces supply uncertainty. The key point is how well the market absorbs the gradual increase in OPEC+ crude oil supply starting in May. If oil demand in the economic recovery phase grows faster than the supply increase, upward pressure on oil prices in the second quarter is expected to rise. Currently, the biggest uncertainty in the oil market is the increase in crude oil supply due to Iran's return to the nuclear agreement. Excluding this risk, the market is expected to find a supply-demand balance toward the second half in a demand-dominant market.

Meanwhile, on the 8th (local time), the U.S. stock market recorded gains supported by strong performances of major tech stocks. With the easing of U.S. Treasury yields and valuation concerns over growth stocks, the Nasdaq index rose 1.03% compared to the previous trading day. The S&P 500 index rose 0.42% to 4,097.17, reaching an all-time high, reaffirming the Federal Reserve's commitment to economic stimulus.