"Semiconductors and Trump Beneficiary Stocks Will Lead the Market"

Korea Investment & Securities Report

It is forecasted that semiconductor stocks and Trump beneficiary stocks will alternately lead the market. Additionally, the Korean stock market, which has become attractive in terms of price from a mid- to long-term perspective, is expected to continue a gradual upward trend based on positive factors.

On the 7th, with the KOSPI rising for the third consecutive day and recovering the 2500 mark, dealers at the Hana Bank dealing room in Jung-gu, Seoul, are seen working with bright expressions. On this day, the KOSPI index opened at 2,520.41, up 31.77 points (1.28%) from the previous session, and the KOSDAQ started at 721.53, up 3.57 points (0.5%) from the previous session. Photo by Jo Yong-jun

On the 8th, Kim Dae-jun, a researcher at Korea Investment & Securities, stated in a report, "The Korean stock market has been rebounding since the beginning of 2025. The index rise is being driven by semiconductors. However, sector rotation in the Korean stock market is rapid, so the leading sectors may change," he said.

According to the Korea Exchange, the KOSPI rose 3.9% from the 2nd to the 7th. The main driver of the rebound was semiconductors. During this period, SK Hynix and Samsung Electronics contributed 0.8 percentage points and 0.7 percentage points, respectively, to the index increase. SK Square and Hanmi Semiconductor, which are classified in the same sector, also contributed to the KOSPI's rise.

Researcher Kim explained the short-term sharp rise in semiconductors by saying, "December semiconductor exports improved compared to November, which was positive," and "The U.S. ISM Manufacturing PMI, which preemptively indicates the Korean IT industry condition, also rebounded."

He also viewed market supply-demand and investor sentiment as favorable to semiconductors. Kim said, "With the global dollar weakening limiting the depreciation of the Korean won, CES 2025, which brings significant momentum to the IT industry every year, sparked optimism," adding, "The appearance of Jensen Huang, CEO of NVIDIA, as a speaker and the expectation of new product announcements started to create a favorable wind across the IT industry, including semiconductors."

The KOSPI, which had been sluggish, is also attractive in terms of price. The 12-month forward PER of the KOSPI is significantly below the 10-year average.

Considering these points, from a mid- to long-term perspective, it is time to consider increasing weight with the expectation of an index rise, explained Kim. He said, "Although many negative factors have not yet disappeared, it should be noted that the KOSPI has become more resilient," adding, "Even if the probability is low, if positive factors emerge, the market can rise quickly." However, he judged that it is still too early to expect a full rebound.

Even with an optimistic market outlook, he suggested that some differentiation in sector selection is necessary. This is because sector rotation has been frequent during the index rise process, and this phenomenon may continue throughout this year.

He said there are three conditions to watch for the market to rise further. First is whether the new administration's fiscal and monetary policies after Trump's inauguration change differently from expectations. He pointed out, "The new government may adjust policy intensity in a way that causes less shock to the market," citing tariff policy as a representative example.

He also advised monitoring how the U.S. Treasury decides on bond supply depending on whether market interest rates fall. Additionally, he emphasized the need to watch for the possibility of strengthened stimulus policies in various countries.

He analyzed, "In particular, it is necessary to see whether China implements strong stimulus after the Lunar New Year holiday," and added, "All three variables are likely to develop in a direction favorable to the stock market."

Researcher Kim predicted that if interest rates remain at low levels, sector rotation will become more active in the Korean stock market, resulting in an upward trend in the index. He suggested preparing a strategy to gradually increase weight in the KOSPI if such an outcome is expected.

He said, "It will be difficult to expect a continuous rise in a specific sector in the Korean stock market like in the U.S. in the future," but added, "However, sector rotation centered on sectors with favorable outlooks is still highly likely. Low-price buying of HBM leading stocks and increasing the weight of Trump beneficiary stocks such as shipbuilding, defense, and bio will be necessary measures to secure alpha."