[Click eStock] "Predicting the 2025 Korean Market with Three Charts"

Shinyoung Securities analyzed in its report titled '2025 Korean Market Forecasted Through Three Charts' on the 23rd that "foreign investors have net purchased nearly 12 trillion KRW excluding Samsung Electronics this year," and "despite the uncertain market environment, high-dividend stocks and value stocks continue to outperform."

Foreign Net Purchases in 2024: Approximately 12 Trillion KRW Net Bought Excluding Samsung Electronics

The KOSPI has been on a downward trend for six consecutive months. Internationally, the strong dollar pressure following the December Federal Open Market Committee (FOMC) meeting and concerns about the second Trump administration, along with domestic political uncertainties arising after martial law, are the main issues. Particularly, the collapse of the year-long value-up expectations was the decisive blow.

However, when aggregating foreign net trading trends this year, a peculiar phenomenon is observed. Excluding Samsung Electronics, foreign investors have actually net purchased nearly 12 trillion KRW in the Korean market.

Foreign investors recorded a cumulative net purchase of 25 trillion KRW in the KOSPI market until August, but from September, they began large-scale net selling, and as of now (December 20), the cumulative net purchase for 2024 has shrunk to 1.5 trillion KRW.

Most of this net selling is actually concentrated on a single stock, Samsung Electronics common shares. Since September, foreign net selling amounts to 19.8115 trillion KRW, of which 18.9767 trillion KRW (about 96%) is from Samsung Electronics common shares. Excluding Samsung Electronics, it is safe to say that foreign investors have hardly sold Korean stocks.

Although selling pressure has spread to other sectors such as banks after the December impeachment political turmoil, it is not considered mainstream. Still, 70% of foreign selling is concentrated on Samsung Electronics. So-yeon Park, a researcher at Shinyoung Securities, said, "Looking ahead to 2025, this means we should not be overly pessimistic."

Uncertain Market Environment: High-Dividend and Value Stocks Continue to Outperform

Since December, various uncertainties have emerged, but in terms of style, value stocks and high-dividend stocks continue to outperform. The reason is that although value-up expectations have faded, it is difficult to simply disregard the officially announced corporate value enhancement plans. Additionally, companies that have changed their dividend record dates to after early next year's board resolutions are likely to maintain dividend expectations through the first quarter of next year.

In the case of the representative value stock sector, shipbuilding, the second Trump administration has expressed a friendly cooperative stance with Korean shipbuilders, creating a new momentum. Recently, four bipartisan members of the U.S. Congress from both the Republican and Democratic parties introduced the Shipbuilding Enhancement Act. Its purpose is to encourage shipbuilding in the U.S. and reduce dependence on Chinese ships. It includes establishing a maritime security advisor position within the White House, expanding the U.S. merchant fleet to 250 vessels within 10 years, and introducing a 25% investment tax credit for shipyard investments. Furthermore, if it is difficult to procure U.S.-made merchant ships, temporarily allowing the use of foreign-built merchant ships or opening ship repair to other countries could benefit Korea.

Reasons for Expecting Value Stock Dominance in 2025

After the December FOMC, expectations for a significant rate cut by the U.S. Federal Reserve sharply diminished. Historically, when interest rates fall, small and mid-cap stocks and growth stocks tend to benefit, but with ongoing fears about universal tariffs and inflation, it is difficult to prematurely forecast a favorable environment for small and mid-cap and growth stocks.

Standardizing the monthly relative strength of WMI500 pure value and pure growth, and WMI large-cap and small-mid cap indices using averages and standard deviations into Z-scores since 2003 shows that over the past 20 years, the current market is a typical large-cap and value stock dominant phase. After the Fed began cutting rates in the second half of the year, the market was watched for changes, but none have occurred yet.

Looking back at past movements, 2003, right after the IT bubble burst, was dominated by small and mid-cap growth stocks, but with the China-driven CAPEX boom, the market shifted to value stocks until 2008. Despite the zero interest rate environment following the 2008 U.S. financial crisis, value stock dominance continued from 2009 to 2011 due to China-driven consumption stimulus. From 2012, a deflation and rate-cut cycle began, leading to a four-year small and mid-cap growth stock cycle. From 2016 to 2019, the market favored large caps riding the emerging market recovery and semiconductor super cycle boom, but the 2020 COVID-19 outbreak caused another phase shift.

Researcher Park said, "Whether there will be an unexpected phase shift next year or the current trend will continue, based on the current flow, it seems more comfortable to remain with value stocks for now."