'Stock Market Full of Uncertainty'... Focus on Profitability Improvement Stocks Until Year-End

[Asia Economy Reporter Lee Seon-ae] Investment advice has been given to focus on companies whose profitability indicators steadily improve until the end of the year amid various uncertainties.

According to DB Financial Investment on the 25th, the recent market shows a weak rebound after shocks caused by various issues. The global stock market sharply declined earlier this week due to concerns over the default risk of Evergrande Group, China's largest real estate company. Subsequently, concerns eased following news of interest payments on yuan-denominated bonds and liquidity supply by the People's Bank of China. The September Federal Open Market Committee (FOMC) meeting concretized plans for tapering (asset purchase reduction) within the year, suggesting that the liquidity driving the global stock market's major rise may weaken. The KOSPI reflected issues during the Chuseok holiday period and showed a downward trend.

Seol Tae-hyun, a researcher at DB Financial Investment, explained, "Despite rising earnings forecasts in the energy sector due to international oil price increases, the S&P 500's 12-month forward earnings per share (EPS) declined, and the financial sector, which saw a large weekly drop in earnings forecasts, has experienced six consecutive weeks of declining earnings forecasts. The KOSPI's 12-month forward EPS has also been falling for four consecutive weeks." He added, "Since the market's rebound strength is weak, it is necessary to pay attention to companies expected to steadily improve profitability indicators until the end of the year to enhance portfolio stability."

Companies expected to sustain increases in sales and operating profit margins until the end of the year include Pharmariseo, OCI, RFHIC, Haesung DS, YG Entertainment, Samsung SDI, Hanon Systems, and CJ Logistics.

Top stocks by 12-month forward EPS growth rate include Korean Air, Jeju Air, Mirae Asset Life Insurance, Jin Air, Kumho Construction, Hyundai Marine & Fire Insurance, LG, Lotte Chemical, CJ CGV, and Hyundai Steel. Stocks with the highest target price increases include Korean Air, Samsung Engineering, Kiwoom Securities, S-Oil, Kumho Construction, LG Innotek, Handsome, Hyundai Marine & Fire Insurance, Korea Electric Power Corporation, and Daehan Petrochemical.