[Good Morning Stock Market] Global Macro Environment Uncertainty... "KOSPI Valuation Is Attractive"

Last Week, New York Stock Exchange's 3 Major Indexes Fell by 1-2%
Consumer Discretionary Stocks Declined Across the Board
KOSPI Closed Below 2700 Last Week

Last week, as the US stock market plunged due to recession concerns, there are expectations that the domestic stock market may also experience volatility during trading today (the 5th). However, since the KOSPI index fell below the 2700 level last week, the prevailing analysis suggests that the potential for further decline is limited.

On the 2nd (local time) at the New York Stock Exchange, the Dow Jones Industrial Average closed at 39,737.26, down 610.71 points (1.51%) from the previous day. The Standard & Poor's (S&P) 500 index fell 100.12 points (1.84%) to 5,346.56, and the Nasdaq index plunged 417.98 points (2.43%) to close at 16,776.16.

Concerns about a recession triggered a sell-off for two consecutive days. The July nonfarm payrolls recorded 114,000, significantly below the expected 170,000. The unemployment rate surged from 4.1% last month to 4.3%. The number of unemployed in July increased by 352,000 to 7,163,000 compared to the previous month.

Among individual stocks, consumer discretionary shares sensitive to consumer spending, such as Amazon (-8.8%), Tesla (-4.2%), and Booking Holdings (-9.2%), all declined sharply. This was the largest drop since September 13, 2022. Seokhwan Kim, a researcher at Mirae Asset Securities, noted, "This can be seen as a result of widespread impact from recession concerns."

On the 2nd, the KOSPI closed at 2,676.19, down 3.65% from the previous trading day. This was the first time since June 5 that the closing price fell below the 2700 level. The KOSDAQ index also dropped 4.2% to 779.33, the lowest level since November 13 of last year.

As concerns about a US recession grow, volatility is expected to increase in the domestic stock market for the time being. Researcher Kim said, "The 12-month forward price-to-earnings ratio (PER) based on KOSPI 200 is 8.9 times, and the price-to-book ratio (PBR) is 0.89 times, both below the recent 10-year averages of 10.5 times and 0.94 times, respectively," adding, "While valuations are attractive, attention should be paid to the global macro environment."

Soyeon Park, a researcher at Shin Young Securities, stated, "Unlike the US stock market, the KOSPI's 12-month trailing price-to-book ratio (Trailing PBR) of 1 times is positioned at the 2700 level, so there is almost no valuation burden," and added, "Moreover, the value-up program acts as a momentum for downside rigidity, so the room for decline appears smaller compared to the US market."

However, she also noted, "Recession concerns are intensifying, and profit-taking is inevitable for stocks such as automobiles, which were considered beneficiaries of the weak Korean won," adding, "Volatility is expected to continue until the high valuation burden in the US stock market is resolved. We recommend using this third quarter as an opportunity to rebalance portfolios focusing on high dividends and value stocks."