[Market ING] Stock Market to Watch for Detailed Corporate Value-Up Plans

Government to Announce Detailed Plan for Corporate Value-Up Program on 26th
Short-Term Profit-Taking in Low PBR Stocks... Baton Pass to Export and Growth Stocks

The stock market this week (February 26-29) is expected to move according to the detailed plan of the government's corporate value-up program. If the results meet expectations, the upward trend is likely to continue, but if they fall short, a process of absorbing sell-offs due to disappointment is expected.

[Image source=Yonhap News]

Last week, the KOSPI rose by 0.72% and the KOSDAQ increased by 1.28%. During the week, the KOSPI touched the 2680 and 2690 levels, marking a 52-week high, but profit-taking on low price-to-book ratio (PBR) stocks and a wait-and-see stance ahead of the announcement of the corporate value-up program limited the weekly gains.

Market attention is expected to focus on the corporate value-up program scheduled to be announced on the 26th. Since the rise in low PBR stocks has continued on expectations for the corporate value-up program, if the detailed plan falls short of expectations, a process of absorbing sell-offs is likely. Lee Kyung-min, a researcher at Daishin Securities, said, "Since there has already been a sharp rise due to expectations for the corporate value-up program, unless the program's content shows a surprising result that greatly exceeds investors' expectations, low PBR stocks will undergo a period of overheating and sell-off absorption for the time being."

However, there is an opinion that additional policies may be introduced before the general election, so buying should be considered during any corrections. Kim Young-hwan, a researcher at NH Investment & Securities, explained, "Many expectations about policies have already been mentioned, such as setting improvement targets for indicators like PBR, developing a new stock index to encourage this, and corporate dividend tax credit systems, so it is unlikely that the actual announced policies will exceed expectations. Also, the dividend record dates for automobile and banking companies are scheduled for the 28th and 29th, which may lead to short-term profit-taking sell-offs of low PBR stocks." He added, "However, since additional government policy drives are expected before the April general election, it is judged that buying during corrections is appropriate." NH Investment & Securities has set the expected KOSPI band for this week at 2600-2720.

After the detailed plan announcement, the KOSDAQ is expected to show short-term outperformance compared to the KOSPI. The KOSDAQ also showed relative strength last week. Kim Ji-hyun, a researcher at Kiwoom Securities, said, "Differentiation is progressing mainly among low PBR theme stocks with shareholder returns and cash capacity, so attention should be paid to the top foreign net purchase stocks. Around the announcement of the corporate value-up program, short-term outperformance of the KOSDAQ compared to the KOSPI is expected."

While low PBR stocks that have driven the KOSPI's rise are expected to take a breather, export and growth stocks are likely to take their place. Lee said, "Unexpected large cuts in preferential loan rates in China and stabilization of U.S. bond yields will support the rebound of export and growth stocks. In particular, after the Q4 earnings season, it is necessary to focus on semiconductor, shipbuilding, and internet sectors where the 12-month forward earnings per share (EPS) is stabilizing and foreign net buying is re-entering. After the end of February, the KOSPI rebound will shift the baton from low PBR stocks to export and growth stocks, followed by a final spurt."

Researcher Kim Young-hwan also said, "While the corporate value-up program announcement and bank stock ex-dividend dates may temporarily weaken the value stock theme, expectations for the artificial intelligence (AI) sector are growing, so market interest is likely to focus on growth stock themes. It is necessary to anticipate and respond to differentiation among stocks."

Key events this week include U.S. January durable goods orders on the 27th, U.S. February Conference Board consumer confidence index on the 28th, U.S. January personal consumption expenditure (PCE) price index on the 29th, South Korea's February export-import data on the 1st, China's February National Bureau of Statistics purchasing managers' index (PMI), China's February Caixin manufacturing PMI, U.S. February manufacturing PMI, and U.S. February University of Michigan consumer sentiment index on the 2nd.

With both the U.S. January consumer price index (CPI) and producer price index (PPI) exceeding expectations, inflation concerns have risen again, so attention will focus on the PCE price index. Kim Ji-hyun said, "The current consensus (average securities firm forecast) is PCE inflation at 2.4% (previous month 2.6%) and core PCE at 2.8% (previous month 2.9%), indicating a valid entry into the 2% range and a downward trend. Due to a strong labor market, continued PMI expansion, and signals of a housing market rebound, inflation concerns remain. If the results exceed consensus, a short-term correction is possible, but since the housing cost component that led the CPI rise is lower in PCE, it is likely to meet expectations."