[Second Half Market Outlook] Kospi to Reach 3100 Level

Survey of Research Center Heads at 11 Securities Firms
Average Upper KOSPI Band Forecast 3008... Highest Expected 3150
Rising Momentum from Interest Rate Cuts, Semiconductor Industry Recovery, Export Growth
US Presidential Election and Financial Investment Tax Cited as Uncertainty Factors

Amid the strong performance of global stock markets in the first half of the year, attention is focused on whether the KOSPI, which showed a relatively sluggish trend, can experience a strong upward trend in the second half. The stock market, which was sluggish at the beginning of the year, began to rise from the end of January following the government's announcement of a corporate value-up program, showing strength by breaking its yearly high by the end of March. However, it remained stagnant after April. Recently, as concerns over U.S. interest rates have eased, the market has resumed its upward trend, reaching a new yearly high as of the closing price on the 14th, raising expectations for the stock market trend in the second half. It is anticipated that the second half will show a better trend than the first half. Market forecasts suggest that the KOSPI will surpass the 3,000 mark and rise to the 3,100 level in the second half.

Weight on KOSPI Breaking 3,000 in the Second Half... Potential Interest Rate Cuts, Semiconductor and Export Strength as Upward Momentum

On the 17th, Asia Economy conducted a survey targeting heads of research centers at 11 securities firms, finding that the average upper bound of the expected KOSPI band was 3,008 points. Among the 10 securities firms that provided expected KOSPI bands, 7 predicted that the KOSPI would exceed 3,000 in the second half. Of these, 3 firms expected it to rise to the 3,100 level. The average lower bound forecast was 2,514.4, with most securities firms expecting it not to fall below the 2,500 level.

The possibility of interest rate cuts, favorable semiconductor industry conditions, strong exports, and expectations for value-up policies are expected to act as upward momentum for the stock market in the second half. Kim Young-il, head of the research center at Daishin Securities, explained, "In the second half, an upward trend is expected to develop supported by the actual start of the interest rate cut cycle, the U.S. economy passing its bottom, strengthened economic recovery in China and Europe, a weaker dollar, and improvements in semiconductor industry conditions and corporate earnings."

Oh Tae-dong, head of the research center at NH Investment & Securities, said, "As Korea's export growth continues in the third quarter, stabilization of U.S. Treasury yields and increased expectations for the corporate value-up program will positively impact the domestic stock market."

The expansion of sectors benefiting from artificial intelligence (AI), which led the global stock market in the first half, is expected to act as a factor driving stock market gains. Ko Tae-bong, head of the research center at Hi Investment & Securities, predicted, "In the second half, AI beneficiary sectors are expected to expand," adding, "The benefits will extend beyond high-bandwidth memory (HBM) to legacy semiconductors and IT hardware."

Downside risks for the stock market in the second half include the U.S. presidential election, the implementation of the financial investment income tax (Fintax), and U.S. economic sluggishness. Yoo Jong-woo, head of the research center at Korea Investment & Securities, said, "Delays in interest rate cuts, uncertainties surrounding the U.S. presidential election, and the introduction of Fintax and other tax reforms will act as variables for the stock market." In particular, the global economy is expected to influence the stock market in the second half. Kim Young-il noted, "If the U.S. economic bottoming is delayed, or concerns about deflation in China, delayed economic recovery in Europe, and weakening semiconductor demand expectations arise, these could act as downside risk variables." Additionally, a slowdown in export momentum after the second quarter and concerns about domestic companies' earnings peaking are also expected to negatively impact the stock market.

U.S. Interest Rate Cuts Expected After November... Impact on Stock Market Likely Less Than in First Half

The influence of U.S. monetary policy, which dominated the domestic stock market trend in the first half, is expected to remain but with less intensity than in the first half. The timing of U.S. interest rate cuts is expected to be after November. Lee Seung-hoon, head of the research center at IBK Investment & Securities, said, "The first cut will occur in November," adding, "However, since the rate cut has been largely priced in and the possibility of cuts due to economic concerns is increasing, it may act more as a factor of exposure than a positive catalyst." Yoo Jong-woo said, "One U.S. interest rate cut is expected in the second half, which may be announced in November or December," and predicted, "The stock market will continue to be linked to interest rate changes as it is now." Ko Tae-bong said, "There is little disagreement about the number and timing of rate cuts, so the impact on the market will be minimal."

From the fourth quarter onward, the market is expected to focus more on the economy than on interest rates. Kim Seung-hyun, head of the research center at Yuanta Securities, analyzed, "This year, the start of interest rate cuts has been delayed from March to June, September, and beyond, causing a delay in the turnaround of market interest rates. If rate cuts begin within the year, the intensity of rate cuts next year could be higher than currently expected. However, from the fourth quarter onward, the stock market is expected to pay more attention to the intensity of economic slowdown than to interest rates."

There are opinions that the market's reaction to interest rate cuts could be mixed. In this case, the unemployment rate should be closely watched. Oh Tae-dong said, "The U.S. Federal Reserve is expected to cut rates once or twice in the second half, but the issue is how the financial market will react to the U.S. rate cuts," adding, "The financial market may interpret this as an insurance rate cut or as an acknowledgment of a recession. The stock market will respond positively in the former case and negatively in the latter." He continued, "The key is the unemployment rate; attention should be paid to whether the unemployment rate remains stable or rises when the base rate is cut." He concluded, "Currently, the U.S. economy is likely to move toward a gentle balance, so the stock market is expected to interpret this positively."