KOSPI Recovers Gradually in Second Half... 'Trump' as a Variable [2025 Stock Market Outlook]

Survey Conducted with 9 Major Domestic Securities Firms
KOSPI Expected Range: 2250~3000
If Won Weakness Continues, Foreigners Will Maintain Net Selling Trend

Securities firms expect the stock market to show a 'lower in the first half, higher in the second half' trend this year, with weakness in the first half followed by recovery in the second half. This outlook is based on the assumption that political instability caused by the martial law situation will subside and uncertainties surrounding the policies of U.S. President-elect Donald Trump will clear, allowing the KOSPI to gradually rebound. However, for this to solidify into a sustained upward trend rather than a temporary rebound, strong corporate earnings and exports are prerequisites. Opinions among experts diverged regarding promising sectors and leading stocks this year. Some securities firms pointed to the artificial intelligence (AI) sector and semiconductors, while others highlighted the automobile and financial sectors, which have already priced in Trump-related risks. Shipbuilding and defense industries, expected to benefit from the Trump administration's second term, were also included in recommended lists.

Most Forecast KOSPI Upper Limit at 2800... KOSPI Expected to Show 'Lower in First Half, Higher in Second Half' Trend This Year

On the 2nd, Asia Economy conducted a survey of nine major domestic securities firms. The expected range (band) for the 2025 KOSPI index presented by these firms was between 2250 and 3000. The securities firm with the highest expected band was Daishin Securities, forecasting a KOSPI band of 2400 to 3000.

Kim Young-il, Head of Research Center at Daishin Securities, said, "Uncertainties regarding domestic and international fundamentals, as well as political risks, have already been priced in, so the KOSPI passed its December low last year," adding, "Concerns about earnings and export momentum have eased, making a rebound possible."

Several securities firms predicted that the KOSPI could reach the 2800 level. IBK Investment & Securities (2380?2830), KB Securities (2300?2800), NH Investment & Securities (2250?2850), and Korea Investment & Securities (2300?2800) all forecasted the 2800 level as the upper limit for the KOSPI.

Cho Soo-hong, Head of Research Center at NH Investment & Securities, said, "Due to U.S. interest rate and tariff policies and downward revisions of earnings estimates, the first quarter is expected to continue a weak trend. However, once downward revisions of corporate earnings forecasts conclude and the effects of U.S. tax cuts begin, a rebound could start from the second quarter," advising, "A strategy to buy during price corrections from early in the year through the first quarter should be considered."

Samsung Securities projected the second-highest KOSPI upper limit at 2900, following Daishin Securities. Yoon Seok-mo, Head of Research Center at Samsung Securities, said, "Investors will attempt trading at a 12-month expected price-to-book ratio (PBR) of 0.8 to 0.9, recalling the U.S.-China trade dispute period," adding, "In the first half, when U.S. policy uncertainty is high, the upper band should be set at 0.9 times PBR with a defensive approach, while in the second half, when policy visibility improves, the lower band should be set at 0.8 times PBR."

Hyundai Motor Securities expects the KOSPI to undergo a correction until the first quarter, rebound in the second and third quarters, and then face another correction in the fourth quarter. Noh Geun-chang, Head of Research Center at Hyundai Motor Securities, said, "Given the current attractive valuation of the KOSPI, a rebound will occur once domestic and international uncertainties are removed after the first quarter."

Mirae Asset Securities forecasts the KOSPI to recover gradually over time this year. Park Hee-chan, Head of Research Center at Mirae Asset Securities, said, "As early as the first to second months of this year, when the fourth-quarter earnings of last year are confirmed, stock prices could recover due to easing Trump policy uncertainties and expectations for China's Two Sessions," adding, "The KOSPI is currently deeply undervalued. Over time, improvements in earnings forecasts after the second half and increased relative valuation attractiveness due to interest rate cuts in major countries could lead to a rebound."

Toss Securities expects the index to continue a box range movement. Lee Young-gon, Head of Research Center at Toss Securities, said, "For a rebound of large semiconductor stocks, which significantly influence the index, competitiveness in the AI sector is necessary," adding, "The pace of foreign investor outflows is expected to slow compared to this year. However, for the KOSPI to reverse, the global competitiveness of domestic companies must recover." He further emphasized, "Especially, as policies under the Trump administration unfold and the AI industry's expansion is observed, an investment strategy incorporating U.S. stocks, bonds, and other dollar assets is necessary."

Trump Inaugurated on January 20... Corporate Competitiveness Hinges on U.S. Policies

Experts emphasized that when forecasting this year's market, the policy uncertainties of the Trump administration's second term must be considered a constant. Indeed, many securities firms cited 'Trump policies' as a key factor to consider in market forecasts. If Trump implements tariff policies for America First, Korea's key industries?semiconductors, automobiles, and secondary batteries?will be directly affected. Domestic key industries, which have barely withstood oversupply from China, high exchange rates, and high oil prices, will face another obstacle in the form of weakened competitiveness.

Yoon Seok-mo said, "At least in the first half, the U.S. Federal Reserve's efforts to achieve a soft landing for the economy are expected to support asset market performance. However, unlike Trump's first term, the second term may see figures like Elon Musk or Vice President-elect JD Vance influencing policy decisions."

Cho Soo-hong said, "If tariffs of 60% on China and 10% general tariffs are imposed after Trump's second term begins, it will negatively impact the Korean market," but added, "On the other hand, tax cuts and financial deregulation policies under Trump's second term are liquidity expansion policies, which could attract capital inflows into countries with attractive valuations."

Kim Young-il expressed concern, saying, "While deregulation following the full-scale policy implementation in the second half after Trump's cabinet formation could be positive for some industries, general tariffs and 60% tariffs on China could cause global trade contraction, Korean export instability, and inflationary pressures."

Noh Geun-chang cited factors affecting the stock market this year beyond Trump's tariff policies, including the pace of U.S. Fed interest rate cuts and short selling. Regarding foreign investors' movements, which negatively impacted the domestic stock market in the second half of last year, he said, "Foreign selling appears to be nearing completion. From the latter half of the first quarter, foreign investors may return to net buying, but we need to monitor foreign supply and demand trends after short selling resumes."

Exchange Rate Hinders Stock Market... Corporate Earnings Improvement and Political Stabilization Needed for Foreign Investor Recovery

The main factor weighing down the domestic stock market until the end of last year was the won-dollar exchange rate. As political instability persisted due to the martial law situation, the won's value hit bottom. The year-end closing exchange rate reached around 1480 won per dollar. Along with the sharp rise in the exchange rate, foreign investors sold more Korean stocks. In the second half, foreign investors sold stocks worth about 21 trillion won in the securities market alone.

Yoo Jong-woo, Head of Research Center at Korea Investment & Securities, emphasized, "Foreign investors will maintain a net selling stance in the domestic stock market when the won weakens," stressing the need for exchange rate stabilization.

There is also a forecast that the exchange rate's impact on the stock market will be limited in the medium to long term. Kim Dong-won said, "Political risks often have short-term effects on the economy. The current exchange rate impact will be limited in the medium to long term," but noted, "However, liquidity factors such as foreign capital outflows could increase short-term volatility."

Opinions were also raised that foreign investor supply and demand will recover only after the unsettled political situation that caused the exchange rate surge is somewhat resolved. Kim Young-il said, "It is important that the political situation is quickly resolved, and that the foreign exchange and bond markets normalize rapidly, alleviating anxiety."

Some believe that corporate earnings, rather than political factors, must support active foreign buying. Yoon Seok-mo said, "In past similar cases, foreign investors traded based on corporate earnings forecasts rather than political situations," and predicted, "This time, net buying could resume as downward revisions of earnings forecasts conclude."

Lee Seung-hoon, Head of Research Center at IBK Investment & Securities, said, "Foreign ownership of the KOSPI rose to 35% but has fallen to 31.3%. Considering supply and demand scale, cycles, ownership, and valuation, about 70?80% of foreign selling is estimated to have occurred," adding, "Due to export and economic slowdown, selling dominance will continue until the first quarter, but from the second quarter, preemptive capital inflows reflecting recovery expectations for 2026 will begin."

Sectors to Watch This Year: AI and Semiconductors... Shipbuilding and Defense Also Promising

In a survey asking which sectors to watch this year, the AI value chain received multiple selections. Yoon Seok-mo said, "Although the market capitalization share of integrated semiconductor companies within the semiconductor value chain has decreased, companies maintaining technical entry barriers are expected to benefit from AI development and maintain a certain market cap share, so maintaining interest in these companies is essential," adding, "With the expected continued expansion of AI utilization this year, semiconductor companies playing a central role in the AI value chain could see earnings improvements and valuation rerating." He also positively viewed the shipbuilding sector, which is expected to continue improving earnings due to favorable global supply and demand and cost reductions, and recommended paying attention to utilities and aviation sectors as well.

Noh Geun-chang suggested a strategy of buying semiconductors at the bottom and selling when prices rise in the second half. He said, "A strategy of buying semiconductors at the first-quarter bottom and selling at the fourth-quarter peak will be effective. Samsung Electronics' earnings are expected to bottom out around the second quarter, leading to a price rebound, and SK Hynix is expected to attempt a rebound from the first quarter," adding, "For secondary batteries, buying could be considered from the third quarter in preparation for a fourth-quarter rebound. The bio sector is expected to perform well annually."

Kim Dong-won named soft AI, aerospace, and power equipment as candidates for leading sectors, saying, "Soft AI includes stocks connected to AI application fields and is among sectors expected to see valuation expansion due to monetary easing," and "Aerospace is a sector where the U.S. Defense Advanced Research Projects Agency (DARPA) is increasing its budget and also provides key infrastructure for the autonomous driving era envisioned by Elon Musk." Regarding power equipment, he explained, "If power equipment such as transformers follows a cycle where construction investment lags, as in the 2000s, then power equipment construction investment is just beginning."

Cho Soo-hong identified K-Culture and semiconductors as sectors to watch. He said, "Investment points exist in so-called 'K-Culture' sectors such as entertainment, food and beverage, and cosmetics. Regardless of weakening export momentum in other sectors, Korea's unique strength in K-Culture is expected to be highlighted," adding, "Regarding semiconductors, a box range is expected in the short term. Memory prices are expected to rebound in the second half, and considering the current low valuation, buying on dips is recommended."

Lee Seung-hoon viewed semiconductors and secondary batteries, which experienced significant price declines last year, as potential leading stocks. He said, "After the second quarter this year, price merits will become prominent, and oversold stocks such as semiconductors and secondary batteries could emerge as leaders," adding, "As Trump-related risks and uncertainties, which were excessive after his inauguration, gradually ease, sectors classified as Trump-affected are expected to gain attention."

Yoo Jong-woo of Korea Investment & Securities categorized promising sectors as △ shipbuilding and defense benefiting from Trump policies, △ banks and insurance as oversold value-up stocks, and △ platforms and bio benefiting from low interest rates. Regarding semiconductor outlooks, he said, "Earnings are expected to be revised downward this year, making it difficult for stock prices to gain upward momentum during this period," adding, "Due to poor Samsung Electronics earnings, benefits to the overall domestic semiconductor value chain will be limited, restricting the semiconductor sector's upside potential until the first half of this year. However, SK Hynix is given a top pick and buy rating."

Park Hee-chan highlighted leading sector candidates, saying, "Attention is focused on AI-related semiconductors due to the expansion and growth of the AI ecosystem. As AI agents become widespread, AI will rapidly penetrate advertising, shopping, as well as corporate management and sales activities," adding, "Additionally, shipbuilding and power equipment, which show solid earnings growth, and software and gaming sectors, which are less sensitive to Trump trade dispute issues and expected to turn around, are also positive."