[Good Morning Stock Market] "2600 Level Recovered... Kospi Pauses Then Rallies Again"

With the New York stock market closed for Presidents' Day, the domestic stock market is expected to take a breather on the 18th. The KOSPI has risen for five consecutive trading days, recovering to the 2610 level for the first time in three and a half months, which may bring some pressure from the recent gains. However, securities firms are placing more weight on further rises as valuations are now normalizing.

Yonhap News

The previous day, the KOSPI closed at 2610.42, up 19.37 points (0.75%) from the previous trading day. This is the highest level since October 29 last year, when it recorded 2617.80. It has risen for five consecutive trading days, gaining 3.5% during this period. The year-to-date increase is 8.79%. This rise is higher compared to the New York markets such as the Dow Jones Industrial Average (4.71%), Nasdaq (3.71%), and S&P 500 (3.96%).

Although there is some pressure from the recent rise, securities firms expect the upward trend to continue. Ji-young Han, a researcher at Kiwoom Securities, said, "The KOSPI's trailing price-to-book ratio (PBR) also recorded 0.92 times, the highest since October 29 last year, so there is a possibility of valuation pressure controversy." However, she explained, "It should be interpreted that the valuation, which was sharply adjusted after Trump's election, is normalizing." She added, "It is appropriate to consider the possibility of a sharp price correction or prolonged consolidation phase due to valuation pressure as small."

However, the market is expected to show a consolidation phase on this day due to the pressure from five consecutive days of gains. Researcher Han said, "Due to the speed pressure from five consecutive trading days of gains, and influenced by changes in the US futures market and the Greater China stock markets, the market is expected to take a breather."

By sector, it is advised to pay attention to related sectors as defense stocks surged in the European stock market. The Euro Stoxx 50 index closed at 5519.83 on the 17th (local time), up 26.43 points (0.48%) from the previous trading day.

Researcher Han emphasized, "From a sector perspective, despite expectations for a ceasefire between Russia and Ukraine, European defense stocks showed a strong performance due to forecasts of increased defense spending by NATO member countries." She added, "It is necessary to pay attention to whether there is a price and demand concentration phenomenon in domestic defense stocks (shipbuilding, machinery) as well."

Ji-won Kim, a researcher at KB Securities, also explained, "European leaders held an emergency meeting, and it is expected that they discussed increasing defense budgets." She said, "There is interest in whether a positive trend will continue for domestic defense stocks."