[Yoon Seok-yeol Impeachment] "Expectations for Expansion of Suppressed KOSPI Valuation"

Hanwha Investment & Securities analyzed that the adverse factor which had increased uncertainty in the stock market over the past four months was resolved following the Constitutional Court's unanimous decision on the 4th to uphold President Yoon Suk-yeol's impeachment.

Kim Su-yeon, a researcher at Hanwha Investment & Securities, explained, "The KOSPI's suppressed valuation is likely to expand," adding, "When there was political uncertainty such as a presidential impeachment, valuations were below average and it was a period of confirming the bottom."

He continued, "Once uncertainty is resolved, the multiple recovers to the past average level," noting, "Since 2001, the KOSPI's 12-month forward price-to-earnings ratio (PER) has averaged 9.5 times."

He said, "During the 2017 impeachment of President Park Geun-hye, it was a period when global economic turnaround improved earnings and valuations were declining in the long term," and added, "Immediately after the impeachment ruling, multiples turned around in the short term." He also recalled, "From December 3, 2016, when the impeachment motion was proposed, to March 10, 2017, when the impeachment ruling was made, the KOSPI's 12-month forward PER fell from 9.8 times to 9.4 times and then recovered back to 9.8 times."

Researcher Kim stated, "When the impeachment motion was proposed on December 4 last year, the KOSPI's 12-month forward PER was 8.4 times," and analyzed, "During December, when uncertainty was at its highest, the multiple hit a low of 8.1 times and recently has been moving between 8.6 and 9.4 times amid high volatility." He emphasized, "Now that the ruling result has been confirmed, the valuation, which was suppressed due to uncertainty, is likely to stabilize upward."

He explained, "Earnings forecasts for the KOSPI have been rising over the past month," adding, "Applying the previous multiple peak of 9.4 times to the 12-month forward net earnings of 232 trillion won, the KOSPI stands at around 2720 points." He also analyzed, "Fiscal spending is likely to expand going forward," noting, "According to the IMF, Korea's fiscal deficit relative to GDP was about 0.5% last year."

Researcher Kim advised, "Policies to revive the economy will emerge," and suggested, "It is necessary to pay attention to domestic stocks such as consumer goods, distribution, and construction." He said, "The domestic stock market is erasing uncertainties as it passes through events like the resumption of short selling, the US tariff announcement, and President Yoon Suk-yeol's impeachment ruling," adding, "The exposed adverse factors are no longer variables for the market."