Kim Daejun, a researcher at Korea Investment & Securities, said in the "July Investment Strategy Monthly Report" released on July 2, "The KOSPI in July will move slowly upward within the 3,000 range." The suggested KOSPI band of 2,950 to 3,200 for July corresponds to a 12-month forward (MF) price-to-earnings ratio (PER) of 10.0 to 10.8 times and a 12-month estimated (MT) price-to-book ratio (PBR) of 0.99 to 1.07 times, based on consensus estimates.
Kim noted, "The KOSPI was hot in June. The cumulative return was the fourth highest since 2000," adding, "However, there is no denying that the rise was steep. The KOSPI's 12MF PBR is now almost at 1." Last month, the KOSPI rose 13.9% in just one month, surpassing the 3,000 mark.
However, Kim believes the possibility of a price correction due to overheating is low. He explained, "It is true that the global economic environment is unstable, but supply and demand, which determine stock price direction, are offsetting negative factors. Foreign investors, who had previously shunned the Korean stock market, are now buying stocks and contributing to increased trading activity. Individual investors' perspectives on the stock market are also turning more positive."
Kim also highlighted the domestic demand sector as something to watch in the first month of the second half of the year. He recommended increasing the weighting of domestic demand stocks, stating, "The second supplementary budget and amendments to the Commercial Act will favor domestic demand sectors." While export-related sectors are exposed to risks such as US-imposed tariffs and the burden of a weaker won, domestic demand sectors are expected to benefit from the new government's policy effects. He also noted that the recent progress in amending the Commercial Act is likely to have a positive impact on undervalued domestic demand sectors. Sectors with weak profitability for now but high potential for improvement include distribution, holding companies, construction, software, and cosmetics.
The United States was cited as a key risk factor. Kim said, "The Trump reciprocal tariff suspension ends on July 8. Whether meaningful negotiations can lower tariff rates from current levels is crucial. Depending on the outcome, investor sentiment may change. US fiscal risks should also be monitored." He added, "Domestically, ahead of the second-quarter earnings season, investors should pay attention to sector differentiation according to changes in earnings forecasts."
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