[MarketING] Airline Stocks Soar on Anticipation of Upcoming Holiday Season

KOSPI Falls for Second Day... Drops to 2560 Level
KOSDAQ Falls to 860 Level

The KOSPI fell for the second consecutive day, dropping below the 2570 level. The KOSDAQ also broke below the 870 level. Amid a prevailing wait-and-see sentiment in the market, foreign investors led the decline by selling heavily. While the overall stock market showed weakness, airline stocks, reflecting expectations of increased travel demand, showed strength.

KOSPI closes lower for two consecutive days... falls below 2570 level

On the 28th, the KOSPI closed at 2564.19, down 17.20 points (0.67%) from the previous day. The KOSDAQ ended the session at 866.97, down 7.17 points (0.82%). Continuing its decline for two consecutive days, the KOSPI broke below the 2570 level, and the KOSDAQ fell below the 870 level.

[Image source=Yonhap News]

Foreign investors sold off in both the cash and futures markets, pulling the indices down. On that day, foreign investors net sold 398.7 billion KRW in the KOSPI market and 153.6 billion KRW in the KOSDAQ market. In the futures market, they sold as much as 1.5 trillion KRW. Meanwhile, individual investors bought 301.1 billion KRW in the KOSPI market and 138.2 billion KRW in the KOSDAQ market, and institutions purchased 56.9 billion KRW and 35.5 billion KRW respectively, but it was insufficient to stop the index decline.

Kim Seok-hwan, a researcher at Mirae Asset Securities, analyzed, "Wait-and-see sentiment expanded ahead of Fed Chair Jerome Powell's speech tonight and Micron's earnings announcement." He added, "Foreign selling increased in both cash and futures markets, and the won-dollar exchange rate rose, adding pressure." On that day, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1307.3 KRW, up 7.0 KRW from the previous day.

While the market showed overall weakness, airline stocks stood out with strength. This was due to reflected expectations of increased travel demand ahead of the vacation season. On that day, Korean Air rose 1.89%, and Asiana Airlines increased by 1.47%. Air Busan closed up 3.24%, Jeju Air 1.55%, Jin Air 5.23%, and T'way Air 1.25%. Researcher Kim explained, "Airline stocks showed strength due to factors such as Delta Air Lines' upward revision of earnings, falling oil prices, and expectations of benefits from increased travel demand during the summer peak season."

According to CNBC, Delta Air Lines raised its adjusted earnings per share forecast for Q2 ending in June from $2.00?2.25 to $2.25?2.50. The annual net income estimate for this year was also raised from the high $5 range to $6 per share. Consequently, Delta Air Lines rose 6.84% in the U.S. stock market the previous day, with other airline stocks such as American Airlines Group (5.54%) and United Airlines (5.08%) also showing strong gains.

Park Soo-young, a researcher at Hanwha Investment & Securities, said, "With university students starting their vacations and the third quarter including July-August holidays and the Chuseok holiday in September, routes to Japan and Southeast Asia are expected to be prosperous throughout." He added, "The annual performance of low-cost carriers (LCCs) will likely require the term 'record-breaking'." He further noted, "Both sentiment and fundamentals are improving simultaneously, but airline stocks are still out of the market's spotlight, so I judge this to be a bottom."

Micron earnings announcement, key points to watch

Micron will announce its Q3 2023 fiscal year (March-May) earnings after the market closes on the 28th (local time). The announcement is attracting market attention as it provides insight into the semiconductor industry conditions.

Previously, Micron recorded its worst-ever performance in Q2 (December-February). Revenue was $3.69 billion, down 53% year-over-year and below the expected $3.71 billion. It posted a net loss of $2.3 billion, turning to a deficit. The loss per share was $1.91, missing the expected 67 cents.

For this announcement, there are expectations that the deficit will narrow compared to the previous quarter, signaling the start of earnings improvement. Choi Yoo-jun, a researcher at Shinhan Investment Corp., said, "It is important to focus on the extent of deficit reduction and whether the earnings guidance is revised." He added, "Micron's earnings have served as an event drawing the earnings blueprint for Korean semiconductor companies. It is necessary to watch whether this earnings announcement can raise expectations for earnings improvement among Korean companies."