[MarketING] Stagnant Stock Market Amid Increased Desire for Profit-Taking

KOSPI Falls for Second Day... Drops Below 2580
KOSDAQ Rises for Fourth Day... Stabilizes Above 890

The KOSPI closed lower for the second consecutive day. Amid ongoing macroeconomic uncertainties such as U.S. tightening policies and concerns over a global economic recession, the desire for profit-taking has increased, limiting the index's rise. Stocks expected to report poor earnings ahead of the earnings season are struggling, with some hitting new lows.

KOSPI falls for two days... KOSDAQ rises for four consecutive days

On the 5th, the KOSPI closed at 2,579.00, down 14.31 points (0.55%) from the previous day. The KOSDAQ ended the session at 891.18, up 1.18 points (0.13%). The KOSPI fell back to the 2,570 level, while the KOSDAQ settled at the 890 level.

Institutional selling dragged the KOSPI down. On that day, institutions net sold 614.3 billion KRW in the KOSPI market. They also sold 108.9 billion KRW in the KOSDAQ market. Conversely, foreigners bought 256 billion KRW in the KOSPI market and 24.9 billion KRW in the KOSDAQ market. However, in the futures market, they net sold 1.3 trillion KRW. Individuals net bought 325 billion KRW and 108.6 billion KRW, respectively.

Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "Ahead of the release of the minutes from the U.S. Federal Open Market Committee (FOMC) meeting in June, caution increased, resulting in unclear index directionality," adding, "The KOSDAQ defended downside pressure as secondary battery stocks showed strength."

Semiconductor stocks weakened due to increased profit-taking by institutions. Samsung Electronics, which recently hit a 52-week high, fell more than 1% as institutional selling emerged. Samsung Electronics closed at 72,000 KRW, down 1.37% from the previous day. Institutions were the largest sellers of Samsung Electronics, net selling 196.5 billion KRW. They also net sold SK Hynix by 44.3 billion KRW. SK Hynix also fell 1.01%.

Foreign buying inflows into secondary battery stocks helped defend the KOSDAQ's decline. On that day, foreigners were the largest net buyers of EcoPro, purchasing 103.2 billion KRW, followed by Samsung Electronics (70.5 billion KRW), SK Hynix (46.4 billion KRW), EcoPro BM (38.5 billion KRW), and Geumyang (35.2 billion KRW). EcoPro rose 6.43%, hitting a new high of 958,000 KRW during the session. EcoPro BM increased by 2.55%.

New lows in a row amid earnings concerns

Stocks expected to report weak earnings in the second quarter are struggling ahead of the earnings season. Many are hitting new 52-week lows, showing poor performance.

On that day, LG Household & Health Care fell to 444,000 KRW during the session, marking a 52-week low. It closed down 2.31% from the previous day. CJ Logistics dropped 6.84%, hitting a 52-week low of 70,500 KRW during the session. Kakao Games also recorded a 52-week low during the session.

These stocks are showing weakness as their second-quarter earnings are expected to be poor. According to financial information provider FnGuide, LG Household & Health Care's second-quarter earnings consensus forecasts sales of 1.8512 trillion KRW, down 0.62% year-on-year, and operating profit of 190.6 billion KRW, down 12%. Kim Myung-joo, a researcher at Korea Investment & Securities, said, "LG Household & Health Care's second-quarter operating profit is expected to fall short of market expectations by 11.9%, with sluggish recovery in the Chinese cosmetics market leading to weak performance in the cosmetics division."

CJ Logistics' second-quarter earnings consensus forecasts sales down 4.33% to 3.0012 trillion KRW and operating profit down 1.55% to 114.3 billion KRW. Daishin Securities lowered the target price for CJ Logistics by 19.2% to 105,000 KRW, reflecting slower core business growth and deteriorating investment sentiment toward the CJ Group. Yang Ji-hwan, a researcher at Daishin Securities, explained, "CJ Logistics' second-quarter earnings are expected to be sales of 2.9768 trillion KRW, down 5.1%, and operating profit of 113.5 billion KRW, down 2.3%, which is in line with market expectations. Parcel delivery volume in the second quarter decreased by 5.4% year-on-year, resulting in weaker-than-expected performance." He added, "The recent deterioration in investment sentiment toward the CJ Group, triggered by the CJ CGV rights offering, was also factored in, and there is no momentum to drive stock price increases for the time being."

Kakao Games is also expected to report weak second-quarter earnings. Kim Hyun-yong, a researcher at Hyundai Motor Securities, said, "Kakao Games' second-quarter sales are expected to decline 15.3% to 286.9 billion KRW, and operating profit is expected to drop 59% to 33.2 billion KRW, which is more than 30% below the lowered consensus. This reflects the steep downward stabilization of the main profit source 'Odin' and the underperformance of the new release 'ArcheAge War.' We are lowering the target price by 19% to 42,000 KRW from the previous level."