"Long-term, Regular, and Diversified Investment Essential for Risk Management"

Possibility of 경기선행지수 Bottoming Out and Reversing
Stock Market Expected to Recover from March, Real Economy from September

[Asia Economy Reporter Park So-yeon] "The domestic stock market is expected to hit bottom in March this year." Shim Jae-hwan, Chief Investment Officer (CIO) of Korea Investment Trust Management, recently stated in an interview with Asia Economy, "The stock market typically leads the actual economy by about six months," adding, "Experts predict that the leading economic indicators will bottom out and turn around around March this year, and the stock market will also form a bottom around March." Shim Jae-hwan CIO forecasted, "The Chinese market declined first and has already turned around. Our stock market will bottom out around March, and the actual economy will hit bottom and begin to recover around September."

The Organization for Economic Cooperation and Development (OECD) advanced economy leading indicator has been declining for 16 months since peaking around July 2021 at about 101.5 points. In the securities industry, there is a growing expectation that the current downward trend is gradually narrowing and a rebound could occur around April to May.

Shim Jae-hwan, Chief Investment Officer (CIO) of Korea Investment Management, is discussing his outlook on domestic and international stock markets.
[Photo by Korea Investment Management]

With China's reopening (resumption of economic activities) easing global recession concerns somewhat, and as countries worldwide increase demand and enter a cycle of rebuilding inventories, there is a view that the bottom for South Korea's exports could be brought forward to this first quarter (March).

CIO Shim advised investors to prepare in advance, saying, "If you have been reducing your stock allocation and maintaining a conservative portfolio, it is now advisable to gradually adjust those positions." He added, "The U.S. still has a way to go before hitting bottom, but markets like Korea and China, which declined earlier two years ago, may start to rise. China's leading economic indicators have already turned around."

He also forecasted that the value of the dollar will decline further. A weaker dollar tends to strengthen emerging market currencies. Shim recommended investing first in emerging markets such as China and Korea. He particularly expects government stimulus measures in China and shareholder return policies in Korea to lead the stock markets.

Shim Jae-hwan CIO stated, "There is only one predictable thing about the Chinese stock market: when the government implements stimulus measures, the stock market rises, and when it does not, the market falls." He explained, "During the COVID-19 pandemic, the Chinese government was unable to properly deploy stimulus measures. Now, with reopening, government stimulus will naturally follow, and the Chinese market will rise accordingly."

Regarding which sectors to invest in within the Korean stock market, he said, "Financials and semiconductors are promising." He predicted, "Financial stocks will soon announce shareholder return policies, and semiconductors have been declining but seem to be approaching a bottom in the first half of this year."

He also mentioned hidden risks. Shim said, "Inflation and interest rate issues seem to be settling down to some extent, but there are still remaining risks," expressing concern that "a credit crunch, meaning corporate bankruptcies, could occur." This refers to a certain level of restructuring of insolvent companies due to rapid interest rate hikes. He advised, "To manage risks and achieve successful investments, three essentials are long-term investment, systematic savings investment, and diversification."