In April, the KOSPI Recovers Despite Volatility, Holding at 2800... Sufficient Negative Factors in Q1 Adjustment

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] The securities industry expects the KOSPI to show volatility in April but anticipates a market recovery. This is based on the judgment that negative factors such as the U.S. Federal Reserve's (Fed) interest rate hikes and market corrections have already been reflected in the index fluctuations during the first quarter (January to March).

According to the securities industry on the 3rd, the expected KOSPI fluctuation range for April is as follows: Kiwoom Securities 2600?2950, Korea Investment & Securities 2640?2880, Shinhan Financial Investment 2600?2850, Hana Financial Investment 2580?2850, Daol Investment & Securities 2570?2780, Kyobo Securities 2600?2800, Samsung Securities 2640?2880, Korea Asset Investment Securities 2600?3000, Yuanta Securities 2550?2950, Eugene Investment & Securities 2600?2800, and Daishin Securities 2600?2800.

The upper limit of most expected ranges is around the 2800 level. There are also optimistic forecasts suggesting it could reach as high as 2940?2950.

Han Ji-young, a researcher at Kiwoom Securities, stated, "There are macro uncertainties such as recession debates, Fed tightening, and the weak yen phenomenon, so volatility is expected to increase in April," but added, "The stock price has largely absorbed these through adjustments since the beginning of the year."

Researchers Kim Dae-jun and Kim Sung-geun from Korea Investment & Securities said, "The KOSPI has already absorbed significant negative factors during the first quarter's adjustment process," and "Even if new burdens arise, the market can pass through them indifferently."

However, the prevailing view is that recovering the 3000 level is still difficult. Kang Min-seok, a researcher at Kyobo Securities, analyzed, "For the KOSPI to stay above 3000 as it did until last year, not only a strong momentum recovery but also abundant liquidity in the financial market is necessary," adding, "The investment environment has changed now." Lee Kyung-min, a researcher at Daishin Securities, also said, "In early April, there are major events such as the large-scale Russian default issue, the release of the U.S. Federal Open Market Committee (FOMC) meeting minutes, and preliminary first-quarter earnings announcements from major companies," and predicted, "It will be difficult for the index to rise above the 2800 level."

Researchers Kim Dae-jun and Kim Sung-geun from Korea Investment & Securities also noted, "Even if some sectors with a high market capitalization weight lead the KOSPI's rise, the uncertainty in foreign investor demand remains, making a significant upward trend difficult to expect."

However, looking ahead to the second quarter, the securities firms' outlook is definitely more optimistic. The expected KOSPI range for the second quarter is between 2650 and 3100, with KB Securities suggesting 2800?3100 and Samsung Securities proposing 2650?2950.

Samsung Securities anticipates a stepwise rise in the bottom levels with 2700?2900 in May and 2750?2950 in June. Researcher Kim Yong-gu from Samsung Securities said, "The first quarter was an unknown world dominated by unexpected negative factors and domestic and international uncertainties," adding, "While the second quarter is unlikely to be a bull market, it will be a familiar world where uncertainties become clearer and the market gradually finds its footing against pre-reflected negative factors." He analyzed that if stagflation concerns (economic slowdown amid high inflation) ease and the U.S. dollar weakens, a mid- to long-term bull market cycle could resume.

Researcher Kim said, "The investor sentiment index has bottomed out, which implies that the selling pressure from foreign investors in the domestic stock market has temporarily ended," and predicted, "The inauguration of the new government led by President Yoon Seok-youl, who emphasizes pro-business and pro-market economic policies, could also contribute to improving investor sentiment in the second quarter."

Korea Asset Investment Securities also presented a positive outlook, stating that while April may be difficult, the KOSPI could recover to 3000 in the second quarter.