[Click eStock] Daishin Securities "KOSPI Passes Lowest Point, Christmas Rally Expected"

Daishin Securities forecasted on the 16th that "as the KOSPI passes its lowest point, a new upward trend is expected to develop." They also anticipated a December year-end rally and a Christmas rally.

Due to the unexpected expansion of political uncertainty, the worst-case scenario presented in the December outlook for the KOSPI materialized. After breaking down below the previous low range, it leveled down to around 2360 and then quickly rebounded to recover the 2490 level.

They assessed that the mid-term correction since the July peak has ended, and the possibility of forming a new upward trend has increased. This reflects the view that numerous domestic and international negative factors and the worst political uncertainties have already been priced in.

They believed that just the calming of anxiety and easing of uncertainty could allow an autonomous rebound to the mid-to-late 2500 range. In particular, they expected a December year-end rally and Christmas rally. They anticipated that the easing of uncertainty would coincide with December’s seasonal demand (foreign futures buying, institutional program buying) and the trend of increasing pension fund proportions.

With the interest rate cut cycles of major global countries still effective, they expected solid U.S. economic momentum, visible recovery in the Chinese economy, a leveling down of European benchmark interest rates, and securing economic stability. Supported by strengthened external fundamental drivers and liquidity momentum, as well as a downward stabilization of the dollar, the KOSPI is expected to break out of its previous sluggishness and form an upward trend.

In the short term, they analyzed that there is a high possibility of a short-term pause and overheating relief around the 2580 level, which is an important resistance and turning point where the 480-day moving average is located. They advised that if a sharp rebound occurs following the approval of the impeachment motion on Monday, it would be more effective to expand holdings and accumulate stocks by utilizing short-term fluctuations rather than chasing purchases.

Attention is needed on stocks that have experienced excessive short-term declines and undervalued sectors relative to earnings. The approval of the presidential impeachment motion is expected to ease political uncertainty and bring about new changes. The Constitutional Court will begin deliberations for up to 180 days, and if the impeachment is upheld, a presidential re-election will be held within 60 days.

Since the approval of the impeachment motion in 2016, foreign net buying, enhanced KOSPI stability, and an upward trend are expected. They foresee the KOSPI moving away from differentiated weakness and entering a normalization phase.

Although the domestic political uncertainty caused by the December martial law situation held back the KOSPI, it is expected to rather become a turning point for recovery. The December returns reversed from -1.1% in the first week to +1.6%. The second week’s return was 2.73%, ranking among the top globally. It rebounded sharply by 5.69% from the low point.

A change in perception of the KOSPI market is expected, reflecting various uncertainty variables and even unforeseen political risks that have been preemptively priced in. Additionally, with December’s seasonal demand and net buying by pension funds joining in, a year-end rally for the KOSPI can be anticipated.

The widening negative margin in Chinese imports can be interpreted as a move to reduce inventory. The market disappointment following the release of the Chinese Economic Work Conference results is seen as a process of confirming the gap from previously high expectations. They judged that the government’s willingness to stimulate the economy is sufficiently strong. Notable points include a somewhat more accommodative monetary policy next year, an expansion of the fiscal deficit, and prioritizing domestic demand expansion in policy.

Although the European Central Bank (ECB) implemented a 25 basis point rate cut, it reaffirmed a dovish stance. The ECB cut its main policy rate by 25 basis points, and global investment banks expect the benchmark rate to reach 2% by the second quarter of 2025 and further rate cuts to 1.5?1.75% in the third quarter. The ECB is expected to not only quickly reach the 2% benchmark rate but also lower it below the neutral rate to improve the economic cycle.