[Good Morning Stock Market] KOSPI Earnings Forecasts Decline... "Focus on Undervalued Sectors"

As the U.S. stock market closed higher, both South Korea and the U.S. are expected to enter a full-fledged earnings announcement period this week. The domestic stock market is fluctuating around the 2600 level amid continued net selling by foreign investors. On the 21st, the securities industry advised that it is necessary to look at stocks in undervalued sectors whose earnings forecasts are rising.

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On the 18th (local time) at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 43,275.91, up 36.86 points (0.09%) from the previous trading day. The large-cap-focused S&P 500 rose 23.20 points (0.40%) to 5,864.67, and the tech-heavy Nasdaq Composite increased by 115.94 points (0.63%) to close at 18,489.55.

Kim Seok-hwan, a researcher at Mirae Asset Securities, analyzed, "The U.S. stock market closed higher, supported by strong corporate earnings and gains in major tech stocks," adding, "Raphael Bostic, President of the Federal Reserve Bank of Atlanta, emphasized patience in achieving a neutral interest rate, somewhat lowering expectations for a Fed rate cut." He continued, "In this market environment, investors are maintaining interest in upcoming economic data releases and the Fed's interest rate decisions."

This week, about 20% of companies listed on the S&P 500 will report earnings. Big tech companies such as Tesla and Amazon are scheduled to announce their results. Additionally, economic indicators including the Purchasing Managers' Index (PMI) will be released.

The same applies to South Korea. However, unlike the U.S., the outlook for the Korean stock market is not very bright. According to NH Investment & Securities, 79% of U.S. companies that have disclosed earnings so far have exceeded market expectations. In contrast, in South Korea, earnings forecasts are being revised downward ahead of the full-scale earnings announcements.

Lee Sang-hoon, a researcher at NH Investment & Securities, said, "In South Korea, earnings forecasts are being revised downward ahead of the full-scale earnings announcements," adding, "The KOSPI's third-quarter net profit forecast has been adjusted down by 0.5% over the past two weeks," attributing this to a weakening expectation of recovery in the semiconductor sector's earnings and a reduced exchange rate effect on export companies.

However, there is advice to pay attention to stocks whose earnings forecasts have recently been revised upward. Lee Kyung-min, a researcher at Daishin Securities, explained, "The fortunate point is that the one-month consensus (average securities firm forecast) for KOSPI's third-quarter operating profit is being revised upward," adding, "Although the three-month earnings consensus is generally used, the one-month consensus near the earnings season quickly reflects changes in the pre-earnings season, so it is worth noting."

He emphasized, "At the current point, sectors that are undervalued relative to the change rate from the peak after August in third-quarter operating profit include semiconductors, automobiles, transportation, shipbuilding, consumer staples, construction, telecommunications, banking, and steel," adding, "Among these sectors, automobiles, transportation, telecommunications, banking, and securities have entered undervalued territory relative to earnings in both the three-month and one-month consensus, which is noteworthy." He continued, "The automobile, steel, shipbuilding, banking, securities, and telecommunications sectors are undervalued relative to earnings while their one-month consensus is being revised upward."