[MarketING] Approaching the End of the Bear Market, Buy on Dips

End of Bear Market Phase
Buying Opportunity at Low Prices During Short-Term Corrections

[Asia Economy Reporter Song Hwajeong] Despite concerns such as valuation burdens, the stock market is showing a solid performance, leading to analyses that the bear market is coming to an end. As the upward trend is expected to continue, it seems necessary to consider short-term corrections as buying opportunities at lower prices.

Ending Phase of the Bear Market

As of 10:15 AM on the 3rd, the KOSPI recorded 2,464.73, down 4.15 points (0.17%) from the previous day. The KOSDAQ fell 0.92 points (0.12%) to 763.70. On this day, the KOSPI started lower, then turned upward, but returned to a downward trend, fluctuating within a narrow range in the early session. The KOSDAQ started slightly higher but turned bearish.

Although fatigue accumulated from the continued rise and concerns over valuation burdens are increasing, the market is digesting important events well and showing a favorable flow, leading to analyses that the bear market is ending. Lee Jinwoo, a researcher at Meritz Securities, explained, "There may be doubts whether this rebound is a technical rebound within the bear market or the end of the bear market," adding, "As inflation peaks, the rationale for the inflation-driven bear market is turning a corner, so it is judged as the end of the bear market rather than a technical rebound."

Lee Euntaek, a researcher at KB Securities, said, "Currently, the market is interpreted as being in the phase of ending the bear market," adding, "Excessively high valuations, the Federal Reserve's (Fed) persistent tightening, and noise in the inflation decline path may occasionally limit stock price rebounds, but this is not seen as the start of a new bear market."

However, opinions remain that a return to a bull market is not yet imminent. Researcher Lee Jinwoo stated, "The end of the bear market does not immediately mean a return to a bull market," explaining, "It is still an extended phase of recovery rather than a return to a bull market. The key question is when and at what pace the market will return to a bull market."

Effective Approach to Buying During Short-Term Corrections

Since the domestic market has risen rapidly, a short-term pause is possible, but the upward trend is expected to continue.

Kim Daejun, a researcher at Korea Investment & Securities, said, "The January market recorded a strong performance contrary to initial expectations," explaining, "This is because the assumption of demand slowdown, which predicted market weakness, was broken as expectations for economic normalization strengthened due to China's reopening." He added, "From this perspective, the outlook for the domestic market is shifted to neutral or above," and continued, "Considering China's economic stimulus measures to be announced in March, the end of the monetary tightening cycle, and foreign net buying due to dollar weakness, there is no need to maintain a negative view of the market."

He expressed that buying during short-term corrections is effective. Researcher Kim said, "Due to the sharp rise in January, the market has entered an overheated zone, and short-term corrections may occur, but these should rather be seen as opportunities to buy stocks at lower prices," adding, "If one were to sell stocks and exit the market, it would require the premise that future lows fall below the 2,180 points recorded in early January. Since the low came earlier than expected, even if corrections occur, there is no need to sell stocks."

Kim Yonggu, a researcher at Samsung Securities, analyzed, "The friction process between trend changes and cyclical resistance factors will stimulate a short-term pause in the market in February," adding, "Expectations for 'Good Disinflation' such as global supply improvement, resilient demand, downward stabilization of inflation and interest rate environment, and the US dollar weakening correspond to trend opportunity factors for this year's market." He continued, "Even assuming short-term friction, it is possible for the KOSPI to settle around the 200-day moving average line (about 2,420 points), which is the long-term trend line," and added, "At the current price level, which already reflects the reality of a future recession and even some possibility of a crisis, it is more advantageous to hold or buy rather than sell off, even while actively managing risks."