Interest Rate Cut Realized... Possibility of Sell-on
Short Selling Ban Extended Until Q2... Potential for Profit Taking
IBK Investment & Securities analyzed on the 29th that foreign buying momentum is likely to slow down from the second quarter of this year.
Junho Byun, a researcher at IBK Investment & Securities, stated, "The Federal Reserve's (Fed) interest rate cut could materialize in the second quarter, raising the possibility of a 'Sell-on' phenomenon (where increased selling causes stock prices to fall despite demand)." Currently, the U.S. stock market is showing signs of gradually weakening upward momentum due to valuation and technical pressures.
Researcher Byun also explained, "Since the short-selling ban policy is only in effect until the second quarter of this year, some of the funds that flowed in due to the ban are likely to realize profits before the end of the second quarter."
So far, foreigners have shown buying momentum in the domestic stock market due to external factors such as expectations of Fed rate cuts and a soft landing of the U.S. economy, and internal factors including the short-selling ban policy and the 'Corporate Value-Up Program.' Regarding the 'Corporate Value-Up Program,' expectations may continue somewhat as additional guidelines are expected to be announced in May and policies for the second half of the year may be concretized.
However, it is necessary to consider that the stock prices of sectors classified as beneficiaries, such as finance and automobiles, have risen significantly, reflecting a considerable portion of future expectations. Researcher Byun analyzed, "In particular, for finance and automobiles, concerns about business conditions and earnings remain, so it may be necessary to further verify whether the first-quarter earnings will lead to a fundamental rally."
He also pointed out, "Depending on the general election results, doubts about policy continuity and effectiveness may arise among market participants and companies, which could also act as a variable."
Researcher Byun identified the semiconductor industry’s business conditions and earnings expectations as key points for maintaining foreign buying momentum. He said, "Although foreign capital inflow into value stocks related to value-up was highlighted, during the five months of net foreign buying since November last year, 61% of the total foreign net purchases were concentrated in semiconductors. Therefore, foreign semiconductor buying momentum may continue until April, when the effect of earnings surprises will be maximized."
However, it is necessary to recognize that valuation burdens are increasing. Researcher Byun added, "If the stock prices of semiconductor companies Samsung Electronics and SK Hynix rise further until April due to the first-quarter earnings surprise effect, they may face valuation burdens. In other words, after reflecting first-quarter earnings expectations, foreign additional buying momentum may slow down due to valuation burdens."
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