[Good Morning Stock Market] Major Shareholder Capital Gains Tax Volume Reflow... CES and JP Healthcare Theme Market

Yonhap News

On the first trading day of the new year, the KOSPI is expected to start slightly higher due to supply and demand factors.

On the 31st of last month (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed near the end of trading down 29.51 points (0.07%) to 42,544.22. The S&P 500 fell 25.31 points (0.43%) to 5,881.63, and the Nasdaq Composite dropped 175.99 points (0.90%) to 19,310.79.

The New York stock market showed light trading volume without any particular issues. Since Christmas, profit-taking selling pressure has continued mainly in large tech stocks, causing major indices to remain weak. The Philadelphia Semiconductor Index also declined by 0.93%, showing a sluggish performance.

By sector, the energy sector rose 1.35%, recording the highest gain. Real estate and materials sectors also showed relative strength. In contrast, IT, consumer discretionary, and communication sectors, which have a high proportion of big tech stocks, declined by around 1%, showing weakness. Overall, profit-taking selling pressure led large tech stocks to weaken, while some sectors recorded gains, resulting in a mixed market trend.

The domestic stock market has declined since the second half of last year due to concerns over the unwinding of yen carry trades, foreign selling of Samsung Electronics, the financial investment income tax issue, uncertainties over Trump’s policies, and the martial law situation. As a result, not only foreign investors but also individual investors who had entered the market after COVID-19 have withdrawn funds, deepening the domestic market’s marginalization.

However, the market views that many of the internal and external negative factors have already been priced in, with the KOSPI forming a bottom around the 2,400 level. Based on the 12-month forward price-to-earnings ratio (PER), the S&P 500 stands at 22.1 times, which is in an overvalued range compared to the 10-year average, while the KOSPI remains undervalued at 8.1 times.

Historically, in the year following a year when both the KOSPI and KOSDAQ indices recorded negative annual returns, they have averaged gains of 25.3% and 19.8%, respectively. Considering this, there is an analysis suggesting that the domestic market’s upward momentum could potentially be stronger compared to the global market.

Seonghun Lee, a researcher at Kiwoom Securities, said, “To justify the undervaluation of the domestic market, it is necessary to confirm whether the downward revision trend of corporate earnings forecasts, which has continued since September last year, is coming to an end,” adding, “Attention should be paid to whether the ISM Manufacturing PMI to be announced on the 4th and Samsung Electronics’ preliminary Q4 earnings report on the 8th will act as catalysts for a market rebound.”

He continued, “Today, the domestic market is expected to show a relative outperformance of the KOSDAQ market compared to the KOSPI due to supply and demand factors such as fund re-inflows following the year-end major shareholder capital gains tax selling and sales triggered by financial investment,” and forecasted, “Additionally, with events such as CES 2025 and the JP Morgan Healthcare Conference scheduled for early January, a thematic market centered on related beneficiary stocks is expected to unfold.”