Why You Should Sell Stocks Despite Securities Firms Saying No Decline in August?

[Asia Economy Reporter Kwon Jae-hee] As the securities industry raises the upper bound of the KOSPI index for August, stating "there will be no decline," voices are emerging that the current short-term rebound is the right timing to sell. In the short term, most negative factors have already been priced in, placing more weight on an increase rather than a decline, but in the long term, the earnings of listed companies are decreasing.

On the 2nd, the securities industry projected the upper bound of the KOSPI index for August to be between 2550 and 2650. Samsung Securities and Hyundai Motor Securities predicted the upper bound at 2550, while KB Securities, Kiwoom Securities, and Cape Investment Securities forecasted around 2600. Daishin Securities expected up to 2640, and Kyobo Securities even looked ahead to 2650.

The consensus behind these predictions is that most of the negative factors have already been priced in. Last month, after the U.S. Federal Reserve (Fed) held the Federal Open Market Committee (FOMC) meeting, risk sentiment spread in the domestic stock market, followed by a relief rally. This is based on the fact that the market rose despite the giant step rate hike and the shock from the Consumer Price Index (CPI).

Kim Yong-gu, a researcher at Samsung Securities, forecasted, "As global interest rates pass their peak, the extreme valuation discount phenomenon will gradually ease, driving further increases in the stock market in August."

However, some predict a sharp drop after the short-term rebound, citing the decline in listed companies' earnings. Daishin Securities advised that while the market could recover to the 2600 level, it might sharply fall afterward, recommending selling stocks and converting to cash at the 2600 mark.

Lee Kyung-min, head of the investment strategy team at Daishin Securities, said, "The KOSPI index is expected to continue rebounding to the first target of 2600 from late August to early September. However, from the fourth quarter of this year, a negative earnings market is expected as corporate earnings deteriorate, potentially dropping to the 2050 level."

He added, "At the 2600 level, it is advised to increase cash holdings and focus the portfolio on defensive stocks."

Samsung Securities recommended increasing purchase weights in sectors that have experienced significant declines, such as semiconductors and secondary batteries, while Shinhan Investment Corp. highlighted cosmetics and software. Daishin Securities suggested focusing the portfolio on inflation hedge stocks such as dividend stocks, telecommunications, and food and beverage sectors.