[Weekly Market Outlook] Market Without Events... Focus on Q2 Earnings Improvement Stocks

KOSPI Closes Down 0.8%... Semiconductor Stocks Show Strength

This week (June 12-16), the domestic stock market closed at the 2620 level, supported by the rise in the semiconductor sector. Next week, although it will be difficult for the stock market to show a strong upward trend due to increased concerns over interest rate hikes by the Federal Reserve (Fed) following the June Federal Open Market Committee (FOMC) meeting, investor interest is expected to focus on stocks expected to show improved earnings in the second quarter.

[Image source=Yonhap News]

According to the Korea Exchange on the 18th, the KOSPI fell 0.82% from 2647.49 to 2625.79 this week. Foreign investors were net buyers of 276.8 billion KRW over the week, and individual investors purchased 164.4 billion KRW worth of stocks. Institutional investors alone sold stocks worth 414.5 billion KRW. During the same period, the KOSDAQ index remained flat, moving from 887.20 to 887.95, with individual investors buying stocks worth 270 billion KRW and institutions selling stocks worth 181.4 billion KRW.

The semiconductor sector continued its strong performance this week. While the U.S. Philadelphia Semiconductor Index rose more than 2.95%, semiconductor materials, components, and equipment companies showed notable strength, pushing the KRX Semiconductor Index up by over 2%. SK Hynix rose more than 3.93%, and Hanmi Semiconductor (8.2%), Semtech (10.7%), Hana Micron (3.75%), Seoul Semiconductor (3.72%), Inox Advanced Materials (2.79%), and KoYoung (1.27%) also increased.

Later in the week, news that a Chinese battery company would enter the U.S. market caused some volatility among secondary battery companies listed on the KOSDAQ market. This was due to growing concerns over intensified competition between Korean and Chinese battery manufacturers. As a result, L&F closed down 5.2%, and EcoPro BM fell slightly by 0.75%. Zaigle, considered a secondary battery theme stock, plunged more than 11%. The KOSPI also slipped to the low 2600s as the results of the June FOMC and China's economic indicators, which were major events this week, did not meet expectations.

Next week, the stock market is expected to show volatility depending on market interpretations of the June FOMC results. After Fed Chair Jerome Powell’s press conference, the market anticipated no immediate rate hikes, but future economic data releases could change this outlook. Na Jeong-hwan, a researcher at NH Investment & Securities, said, “Since the year-end interest rate was raised in the June dot plot, the possibility of a rate hike within the year cannot be completely ruled out,” adding, “Expectations for a rate cut within the year have diminished, limiting the upside for stock prices.” NH Investment & Securities’ expected KOSPI range for next week is between 2540 and 2660.

With the major event of the FOMC behind, the market is expected to show an upward trend centered on companies anticipated to improve their second-quarter earnings. Researcher Na analyzed, “Sectors expected to see improvements in operating profit forecasts include trading companies, capital goods, transportation, cosmetics, and apparel,” and added, “Ahead of the second-quarter earnings announcement season, attention will shift to sectors expected to show a turnaround in earnings.” The upward trend in semiconductor companies is also expected to continue. Han Jae-hyuk, a researcher at Hana Securities, said, “Earnings estimates continue to rise, but the price increase will be centered on small-cap stocks that have not yet caught up,” and added, “As investment sentiment toward the semiconductor sector improves, we expect semiconductor companies to rise and a rotation market to emerge.”