KOSPI Expected to Reach 2900 This Year [Market Analysis by Center Director]

12 Securities Firms' Research Center Heads' Outlook
Interest Rate Cuts and US Presidential Election Cited as Variables
High Start Low Finish vs Low Start High Finish Almost 'Even'

Investors are focusing on whether the stock market, which ended last year on an upward trend, will continue its strength this year. The KOSPI, which closed higher on the first day of the new year and approached the 2,670 level, has not yet shown a clear trend, as fatigue from four consecutive days of gains and expectations for a U.S. interest rate cut were already priced in, leading to a drop of more than 2% in just one day. Heads of research centers at securities firms forecast that the stock market could rise to as high as the 2,900 level this year. Opinions on the market trend for the first and second halves of the year were divided. Given the many variables that could affect the market this year, such as interest rate cuts, economic recession, and the U.S. presidential election, the stock market is expected to show a variable pattern depending on volatility.

High First Half, Low Second Half VS Low First Half, High Second Half 'Split Even'

On the 4th, Asia Economy surveyed heads of research centers at 12 securities firms including Mirae Asset, Korea Investment & Securities, NH Investment & Securities, KB Securities, Samsung Securities, Daishin Securities, Meritz Securities, Shinhan Investment Corp., Kiwoom Securities, Hana Securities, Kyobo Securities, and Hi Investment & Securities about their outlook for the stock market this year. The results showed that the lowest point for the KOSPI in 2024 is expected to be around 1,900, and the highest point around 2,900.

Opinions on the market trend for the first and second halves of the year were divided. Securities firms forecasting a high first half and low second half were almost evenly split with those expecting a low first half and high second half. Park Hee-chan, head of the Mirae Asset Securities Research Center, said, "This year’s stock market is variable because positive factors from expected interest rate cuts and negative factors from global economic slowdown and U.S. recession risks overlap. If the U.S. achieves a soft landing and interest rates are cut, the stock market is expected to have greater upside potential in the second half."

Yoon Chang-yong, head of Shinhan Investment Corp.’s Research Center, said, "I expect an upward trend in the first half due to inventory cycle recovery and semiconductor market improvement. However, in the second half, caution ahead of the U.S. presidential election, economic cycle downturn, and tax issues in 2025 will weigh on direction, so I anticipate the first half to be better than the second."

Ko Tae-bong, head of Hi Investment & Securities Research Center, said, "The pattern of the stock index will not be very important. Since the index is expected to rise slowly with limited volatility, individual stocks will outperform the index in what will be a stock-specific market." He added, "If I had to choose, the index rise is more likely in the second half, but the election risk makes it difficult to forecast."

The rebound that began at the low point in October last year is expected to end early this year. Kim Young-il, head of Daishin Securities Research Center, said, "The first quarter of this year will be a gap period for monetary policy and economic momentum, with interest rates expected to remain steady. U.S. economic slowdown is inevitable, and recovery in Europe and China will be limited. Excessive expectations for interest rate cuts will normalize, and year-end dividend arbitrage program selling will emerge in January and February, increasing supply-demand instability." He added, "Short-term volatility is expected to increase until around the March U.S. Federal Open Market Committee (FOMC) meeting, but after that, the market will enter a phase of 'interest rate cuts + economic recovery/turnaround,' resuming and strengthening the upward trend."

Market Variables: Elections and Economy

Variables expected to affect the stock market this year include interest rate cuts, domestic general elections and the U.S. presidential election, concerns about a U.S. economic recession, and the domestic real estate market. Last year, the U.S. interest rate path had a significant impact on the domestic stock market, and this year, with expected rate cuts, volatility could increase depending on the magnitude and timing. Yoo Jong-woo, head of Korea Investment & Securities Research Center, said, "This year will have many positive issues for investment, such as expectations for interest rate cuts and recovery in Chinese consumption. However, considering the extent of rate cuts, U.S. presidential election-related issues, and ongoing U.S.-China conflicts, preparation for volatility is necessary." Hwang Seung-taek, head of Hana Securities Research Center, said, "One of the biggest points to watch in the stock market this year is the timing and number of Fed rate cuts. According to the Chicago Mercantile Exchange (CME) FedWatch, the market expects the first rate cut in March and a total of six cuts this year. The Fed’s dot plot released last December suggests three cuts by the end of next year, with a median rate of 4.625%. Early rate cuts could cause concerns about reduced aggregate demand and economic weakness, but after some adjustment, expectations for corporate profit recovery due to reduced interest burden could expand."

The U.S. presidential election is also a key variable. Oh Tae-dong, head of NH Investment & Securities Research Center, said, "Since the main driver of the global economy is currently U.S. investment, and investment direction can change depending on U.S. government policies, the U.S. presidential election will be an important event this year. Historically, volatility has increased and the stock market has corrected about a month before the election, usually in October. Considering the uncertainty of this year’s election, its impact is expected to appear after September." Ko Tae-bong also said, "The U.S. presidential election will be the most influential variable because of the significant policy differences between the Democratic and Republican parties and its major impact on U.S.-China conflicts and Korean economic policies."

The domestic real estate market is also cited as a major variable. Yoo Jong-woo said, "Real estate could emerge as an important variable in Korea. Considering household debt reaching 1,870 trillion won and various project financing (PF) business failures, the shock to the Korean economy and stock market could vary greatly depending on the real estate market." He added, "Real estate affects wealth effects, real consumption, and fund management, so if the real estate market contracts, domestic investors’ investment capacity may weaken, which could hinder stock market gains despite export improvements due to domestic economic uncertainty."

The global economy is expected to grow slightly slower than last year. Kim Young-il said, "Global economic growth this year is expected to slow slightly compared to last year and fall below the average trend. A smile-shaped pattern is expected, with a low point in the second to third quarters and a weak recovery in the fourth quarter." Structural growth momentum is expected to continue declining in China and the Eurozone, while U.S. consumption and structural investment will gradually slow.

The Korean economy is expected to show slight growth. Lee Kyung-soo, head of Meritz Securities Research Center, said, "Global economic growth is expected to slow from 3.1% last year to 2.9% this year. The notable point is that while growth slows in the U.S., Japan, and China, Korea is expected to show slight growth due to a manufacturing recovery cycle based on B2B (business-to-business) transactions amid global consumption slowdown."