[Reporter’s Notebook] With Pessimism Overwhelming the 'Boxpi' Market, It's Time to Overcome with a Contrarian Approach

KOSPI Stuck in a Box Range, Weighed Down by Samsung Electronics
Investor Sentiment Hits Bottom Amid Disappointment Over Value-Up Policy and Tax Debates
Contrarian Approach May Offer Opportunities as Market Builds Immunity

"It seems unlikely that the KOSPI will strongly break above the upper range by the end of the year. Samsung Electronics' sluggish performance is limiting the index's upside. However, the downside is not completely open either. It's a frustrating Boxpi."

This has been the most common market outlook heard from securities industry experts throughout the year when the reporter asked about the domestic stock market forecast. The most frequently mentioned term is 'Boxpi.' Boxpi refers to a market where stock prices fluctuate only within a certain range. Since the sharp drop in August due to concerns about a U.S.-origin recession, the KOSPI has been unable to surpass the upper boundary of the box range at 2700 points. Occasionally, when valuation pressure eases, it attempts a weak rebound.

The weak market stamina of the KOSPI was clearly revealed last month when SK Hynix plummeted following Morgan Stanley's report titled "Winter is Coming." Samsung Electronics also hit a 52-week low, falling to 59,500 KRW intraday on the 7th. Samsung Electronics' DS Division head, Jeon Young-hyun, even apologized for the third-quarter earnings that fell far short of market expectations. Consequently, the crisis theory that "the growth of the Korean stock market led by semiconductors has now hit structural limits" has increased significantly.

Investor sentiment is also hitting rock bottom. The phrase "escaping the national market is a matter of intelligence" has become a popular saying, reflecting the mood. As of the end of the third quarter, the Korean stock market's year-to-date returns lag behind even war-torn Russia and rank the lowest among major global markets, adding self-deprecating labels such as 'last place' and 'outcast.' Furthermore, political debates surrounding the financial investment income tax and disappointment over the value-up index, which had raised expectations among domestic and foreign investors, seem to be fueling a decline in confidence in the domestic stock market.

Stocks of companies that envision growth with a rosy future attract strong buying interest from investors. Like luxury goods, their prices keep rising. However, the recent KOSPI is not like that. It only rises when it becomes extremely cheap, and if it seems even slightly less cheap, selling pressure immediately intensifies. It remains trapped in the 'Korea Discount' pit.

However, by changing perspective and applying a contrarian investment strategy, this could be an opportunity zone where the market is bottoming out. The financial investment income tax, which is acting as the 'uncertainty' the market hates most, will reach a conclusion in one direction or another. The value-up policy will also find its place through communication with the market. Disputes over the management rights of certain companies leading key industries will serve as a foundation to advance governance overall. Sir John Templeton, a master of contrarian value investing, said, "The best investment opportunities come when pessimism is at its peak," and advised, "Wait until 99 out of 100 people give up." There is also a market saying, "Pessimists gain fame, optimists make money."

There is no need to blindly sympathize with a sense of defeat by comparing the domestic market with other global markets under different conditions. The domestic stock market is building immunity by using various noises as stepping stones. Now may be a chance to earn profits through a contrarian approach that differs from others.