Daishin Raises This Year’s KOSPI Target to 3,400

On June 30, Daishin Securities announced that valuation normalization is occurring faster than expected, and accordingly raised its 2024 KOSPI target from 3,150 to 3,400. The firm also recommended that investors use short-term fluctuations in the third quarter as opportunities to increase their holdings.

Lee Kyungmin, a researcher at Daishin Securities, stated in a report released on the same day, "The (revised) KOSPI target of 3,400 reflects a 12-month forward earnings per share (EPS) of 307.6 and a KOSPI price-to-earnings ratio (PER) of 11.1."

First, regarding the recent upward trend in stock prices, Lee explained, "The KOSPI 12-month forward PER has surpassed 10 times, suggesting the possibility of entering a valuation expansion phase," adding that "valuation normalization is occurring faster than Daishin Securities had anticipated," as the reason for the upward revision.

He predicted, "As major countries outside the United States continue to strengthen their policy mix, and as a weak dollar caused by a slowdown in the U.S. economy is expected to persist, we anticipate an expansion of the KOSPI 12-month forward PER and normalization of the price-to-book ratio (PBR)." He further analyzed, "Currently, the PBR remains in the undervalued range. The forward PBR is at 0.96 times, below 1, and the PBR based on confirmed earnings is 1.02 times. Even normalization of the PBR alone could enable the KOSPI to reach the 3,400 level."

Lee also pointed out that, while U.S.-driven tariff and policy noise will be unavoidable in the second half of the year as it was in the first half, he expects the upward trend in the KOSPI to continue. He estimated that "the upside potential for the KOSPI in this upward cycle is up to the 3,900 level."

However, he also noted that short-term fluctuations, correction of overheating, and absorption of supply are inevitable in the third quarter. Lee stated, "Deadlines for trade negotiations in early July, the mid-August deadline for trade talks with China, and the tug-of-war between the Federal Reserve's monetary policy stance and economic indicators ahead of the September Federal Open Market Committee (FOMC) meeting are all expected," adding, "It is also time to consider the adjustment of the gap between policy expectations and reality under the Lee Jaemyung administration."

He further pointed out that the second-quarter earnings season could serve as a trigger for adjusting the gap between stock prices, which have risen on expectations, and actual earnings and business conditions. Lee suggested that if the KOSPI enters a phase of short-term correction and supply absorption in the third quarter, the meaningful support level would be in the 2,770?2,820 range.

Lee emphasized, "As the KOSPI continues its upward trend in the second half, a phase of absorbing excess supply to correct overheating is inevitable. During this process, a move to the 2,800 level should be seen as an opportunity to increase holdings," and recommended a strategy to increase holdings with a view to the KOSPI's strength continuing through 2026.

In particular, he advised restructuring portfolios by reducing exposure to policy beneficiaries and domestic demand stocks, and increasing weightings in sectors with attractive prices, valuations, and strong earnings improvement potential. Specifically, while the shipbuilding, defense, machinery, and domestic demand sectors, which surged in the first half on policy expectations, remain valid, he highlighted semiconductors, automobiles, internet, pharmaceuticals, and bio as sectors with strong earnings momentum and a high contribution to profit improvement in the second half and in 2026.

Lee concluded, "Whether the U.S. cuts rates in September, and whether the U.S. economy recovers from the fourth quarter, will determine trends from the fourth quarter of this year through the first half of 2026," and diagnosed, "The liquidity and policy mix-driven market in the second half of 2025 could expand globally from outside the U.S. in 2026, and expectations for a market driven by earnings and fundamentals could also strengthen."