Stock Market Strategy "Financial Variables Must Decrease"... Expecting a Turning Point in the Earnings Season

During the Chuseok holiday period, volatility in overseas stock markets increased, and the influence of 'financial variables' has also strengthened, slowing down the process of confirming the market bottom. Accordingly, advice has emerged that the influence of financial variables needs to decrease in order to expect an upward trend.

On the 4th, Yang Hae-jung, a researcher at DS Investment & Securities, stated, "China's manufacturing PMI exceeded 50, and the US ISM manufacturing index was 49, continuing improvement compared to the previous month, showing that both China and the US manufacturing indicators sufficiently demonstrate the possibility of improvement," adding, "The indicators released during the holiday have created a favorable environment for Korean exports." He noted, "Korean exports decreased by 4.4% compared to the same period last year, approaching a positive growth rate," and forecasted, "Even considering a simple base effect, there is a high possibility of turning to growth during the remaining fourth quarter."

The improvement in indicators is certainly a positive factor for the market. However, the key issue is the financial variables. Researcher Yang pointed out, "Although not as much as last year, the dollar has been strong in a trend since summer, which is becoming a burden," adding, "Even if it remains sideways, it could be favorable for risk assets."

While the indicators have improved, earnings expectations have been downgraded. Exports and KOSPI earnings tend to move in almost the same direction. Considering this, Yang interprets that the recent decline in earnings sentiment is partly influenced by stock market instability. In the case of semiconductors, which account for a large portion of exports, the export indicators show a clear improvement trend. The bottom is being established, and export volume is rising. On the other hand, expectations for Samsung Electronics' earnings have declined. He explained, "There may be the influence of market instability as well as other variables specific to the company itself."

Researcher Yang forecasted, "Although third-quarter earnings expectations have declined, looking at export trends, the outlook may not be bad," adding, "If so, earnings sentiment is likely to rise along with earnings announcements, and the earnings season could be a turning point."