[MarketING] Rotation Market Due to Issues... Focus on Earnings

KOSPI Closes Lower After 4 Days

[Image source=Yonhap News]

[Asia Economy Reporter Song Hwajeong] The KOSPI closed lower after four days amid increased uncertainty due to concerns over tightening following a surprise in U.S. employment data. As market volatility rises, a rotation trading trend is expected to continue, while related stocks showed strength on expectations of the introduction of Apple Pay.

Related Stocks Strengthen on Expectations of Apple Pay Launch Next Month

On the 6th, the KOSPI closed at 2,438.19, down 42.21 points (1.70%) from the previous session. The KOSDAQ ended the day at 761.33, down 5.46 points (0.71%).

Despite the market closing weak due to foreign selling amid U.S. tightening concerns and a strong dollar, Apple Pay-related stocks showed notable strength. Korea Information & Communications rose 3.93%. Korea Information & Communications is a value-added network (VAN) company connecting merchants and card companies, earning fees from card companies. Iruon, which produces near-field communication (NFC) SIM chips, rose 5.05%. The domestic service of Apple Pay is expected to begin early next month at locations equipped with NFC terminals. Selfie Global, which provides the 'Selfie' service using the 'Tap to Pay' method (using a smartphone as a terminal for digital or contactless payments), the same as Apple iPhone, rose 1.65%.

Expectations for the introduction of Apple Pay, Apple's simple payment service, led to stock price increases. On the 3rd, the Financial Services Commission announced that, considering the Credit Finance Business Act (Credit Finance Act), the Electronic Financial Transactions Act, and related laws and interpretations, credit card companies can proceed with introducing Apple Pay by complying with necessary procedures. Accordingly, iPhone users are expected to be able to use the service as early as next month. Additionally, Hyundai Card's waiver of exclusive rights to Apple Pay has allowed other card companies to adopt Apple Pay.

Kim Seokhwan, a researcher at Mirae Asset Securities, said, "Expectations for the Apple Pay launch were reflected, and small- and mid-cap electronic payment-related stocks showed strength," adding, "With Apple Pay expected to be serviced from early next month and opened to all card companies, NFC payment terminals and simple payment system-related stocks showed overall strength."

Kim Jaewoo, a researcher at Samsung Securities, said, "Online payments will continue to grow under structural change trends," adding, "This is expected to contribute to higher sales growth rates for simple payment and payment gateway (PG) companies specialized in online, mobile, and simple payments compared to card companies."

Ongoing Rotation Trading... Focus on Earnings Improvement

As market volatility expands, rotation trading continues.

Choi Yujun, a researcher at Shinhan Investment Corp., said, "Rather than extending the trend of existing leading stocks, a rotation trading pattern among sectors is appearing," adding, "With coexistence of profit decline and soft landing expectations, an active rotation trading phase will continue."

Although market trends driven by specific issues and themes are appearing, there is an opinion that these may be short-term themes. Shin Jungho, a researcher at Ebest Investment & Securities, said, "Recently, the domestic stock market has shown trends driven by specific issues and themes such as Apple Pay, simple payments, ChatGPT, and artificial intelligence (AI)," adding, "However, these movements are likely to be short-term themes rather than long-lasting, quickly rotating to other themes." He further explained, "If there is a lack of linkage to actual corporate earnings growth, market interest will fade even faster."

In a situation of heightened market uncertainty, attention should be paid to sectors showing earnings rebounds or growth. Researcher Shin said, "Although the market environment is uncertain, it is necessary to focus on areas where indicators directly affecting earnings by sector have bottomed out or show clear rebounds," adding, "Based on sector-specific real indicators, earnings rebounds and growth trends are expected in the transportation and automobile sectors."