[Good Morning Stock Market] Rebound Buying in Stocks with Improved Earnings... LG IPO Supply-Demand Concerns Limit Upside

[Asia Economy Reporter Lee Seon-ae] On the 18th, the domestic stock market is expected to see an influx of rebound buying. However, supply-demand instability caused by the listing of LG Energy Solution is expected to continue acting as a negative factor, limiting the upper range of the index.

◆Sangyoung Seo, Researcher at Mirae Asset Securities= While the U.S. stock market is closed, the rise in European stock markets, supported by China's announcement of economic stimulus measures such as improved Q4 GDP growth and MLF rate cuts, is positive for the Korean stock market.

With the IPO of LG Energy Solution imminent, supply-demand imbalance is inevitable, and recently the Korean stock market has shown sensitive reactions to some negative factors. This is interpreted as foreign and institutional investors having net bought Samsung Life Insurance in the past but sold other large-cap stocks at that time.

However, it is important to note that even then, despite short-term supply-demand instability, net buying continued in stocks with clear earnings improvements, driving the index. Considering this, the KOSPI adjustment due to supply-demand instability is expected to encourage active responses to companies with improving earnings. In particular, the recent rebound in profits of Korean companies, which have been revised downward since July last year, raises expectations for large-cap stocks.

◆Younghwan Kim, Researcher at NH Investment & Securities= In a situation where high inflation continues to be confirmed, an increase in the intensity of the Federal Reserve's tightening outlook is inevitable. However, I believe that a trend decline caused by this is an overreaction. If the spread of Omicron continues to burden the U.S. economy, the Fed will find it difficult to continue strengthening its tightening stance. On the other hand, if the Omicron spread is contained and supply chain disruptions ease, inflationary pressure will subside, reducing the need for the Fed to strongly express a tightening stance. In other words, currently, concerns about the economy and inflation are appearing simultaneously, but if one concern eases, market turmoil is expected to decrease.

On the 17th, Asian stock markets such as Japan, Taiwan, and the Shanghai Composite rose, while the Korean stock market recorded a somewhat large correction, suggesting that supply-demand factors had a greater impact than global issues. Supply-demand concentration is bound to gradually ease after the listing of LG Energy Solution. The supply-demand concentration caused by a large IPO is an event that requires a buying response that takes advantage of it.

◆Jiyoung Han, Researcher at Kiwoom Securities= On this day, the domestic stock market is expected to rebound, supported by the perception that the recent sharp short-term decline below the 2900 level was excessive, along with improvements in Chinese industrial indicators and the rise in European stock markets. However, Fed tightening and the domestic large IPO issue are expected to limit the upper range of the index. Currently, market participants are more sensitive to the Fed's policy uncertainty than to poor indicators and have not yet fully digested the tightening shocks that appeared since the beginning of the year.

Furthermore, the domestic stock market is judged to be experiencing ongoing negative effects from supply-demand distortions related to LG Energy Solution, which is scheduled to be listed on the 27th. Of course, pre-listing supply-demand risks have somewhat eased due to the end of institutional investors' demand forecasting and the completion of existing stock sales by individual investors to raise subscription funds (D+2 settlement, public subscription on the 18th-19th).

However, since competition for securing shares by passive and active funds such as domestic and international benchmark indices and secondary battery theme indices will continue after the listing, it is appropriate to respond by focusing on sectors and stock groups while monitoring Q4 earnings results rather than focusing solely on the index for the time being.