‘Sanggohajeo’ Minority Forecast Hits the Mark?…Expecting KOSPI 2500

Hana Securities and Hi Investment & Securities Expect KOSPI 'High Start, Low Finish'
Resistance at 2550 Level... Earnings Ultimately Key Variable

[Asia Economy Reporter Lee Seon-ae] 'Sanggohajeo' vs 'Sangjeohago'. At the end of last year, the securities industry had differing views on the annual stock market outlook for this year. Most securities firms advocated for 'Sangjeohago'. The 'Sanggohajeo' outlook was only a minority opinion. However, recently, as the KOSPI showed an upward trend and recovered the 2400 level on the 25th after 34 trading days, the minority opinion that predicted 'Sanggohajeo' is gaining attention. Along with this, concerns about the 'Hajeo' phase are also increasing.

On the 25th, the KOSPI closed at 2428.57, up 1.39% from the previous trading day. It surpassed the 2400 mark on a closing basis for the first time in about a month since December 5 last year (2419.32). On the 26th, it raced toward 2500, closing at 2468.65, up 40.08 points (1.65%) from the previous day.

On the 26th, the KOSPI closed at 2,468.65, up 1.65% from the previous day. The image shows the dealing room at the Myeongdong Hana Bank headquarters on the same day. Photo by Yonhap News

As the KOSPI continues to rise, there are talks that the 'Sanggohajeo' forecast might be accurate. Only two firms, Hana Securities and Hi Investment & Securities, predicted 'Sanggohajeo'. Their reason for forecasting 'Sanggo' is that the end of the U.S. Federal Reserve's (Fed) interest rate hikes itself acts as a momentum, which they believe will be a positive factor for stock prices. They expect this momentum to have a greater rebound effect in the first half of the year than in the second half.

There are also opinions that the KOSPI, gaining momentum, could surpass the 2500 level. Lee Kyung-min, a researcher at Daishin Securities, diagnosed, "Considering the rise in the U.S. stock market during the holidays, an attempt to break through the 2500 level on the KOSPI seems possible." He added, "This is a numerical calculation, and individual companies had positive factors, and the Asian stock markets were sluggish, which should be taken into account. However, due to the strong rebound in global stock markets throughout the holiday period, it raises expectations for a sharp rebound in the KOSPI."

However, since the rise was rapid, it is expected to encounter technical resistance levels, making it difficult to expect a smooth upward march. Lee Woong-chan, a researcher at Hi Investment & Securities, said, "The early-year stock market rise is due to two factors: China's lifting of COVID-19 restrictions and expectations for the end of U.S. interest rate hikes." He added, "Since it rose quickly, there could be anxiety, and having reached a technical resistance level, it might take a breather." Lee Woong-chan sees a strong technical resistance level around 2500?2550. He forecasted 'Hajeo', saying, "If unexpectedly strong upward momentum appears in the first half and consensus becomes optimistic entering the second half, the upward momentum afterward might not be very strong." Researcher Lee Kyung-min also said, "This is a phase of expanded reproduction of existing expectations," adding, "Looking at the recent rebound momentum, there is nothing new (momentum)."

Although there is remaining upward potential due to the large previous decline, experts agree that corporate earnings are ultimately the key point. Han Ji-young, a researcher at Kiwoom Securities, analyzed, "The future direction of stock prices depends on whether a solid earnings season will be experienced." She added, "In the U.S., the earnings of big tech and growth stocks like Apple and Tesla, and in Korea, the earnings of cyclical stocks and secondary battery stocks like Hyundai Motor and EcoPro BM will have a significant impact on the stock market direction."

Recently, aggressive net buying by foreigners has led the KOSPI's rebound, but concerns remain that if earnings do not support it, the trend will falter. Cho Chang-min, a researcher at Yuanta Securities, explained, "Without improvement in fundamentals, we cannot continue to expect foreign demand."