[Click e-Stock] "Trump Tariff Risk: Focusing on Leading IT Stocks Remains Effective"

"Global Stock Market Overheating Concerns Widen"
"Importance of Leading IT Stocks in Korean Market Becomes More Pronounced"

Amid growing concerns over a US-China "tariff war" fueled by strong remarks from US President Donald Trump, analysts in the Korean securities industry have suggested that investors should respond to market volatility by focusing on leading stocks in the IT (Information Technology) sector.

On October 13, Kim Daejun, a researcher at Korea Investment & Securities, stated, "It is advantageous to respond to heightened volatility by focusing on leading stocks, and IT will be the key sector."

On October 10, the US stock market was significantly shaken by President Trump's hardline comments on China. The S&P 500 Index fell by 2.7%, and the Philadelphia Semiconductor Index, which is closely linked to Korean stocks, also saw a steep decline. Kim noted, "The IT sector, which has been driving the market, came under significant correction pressure, and the Magnificent 7 (M7: Apple, Amazon, Alphabet, Microsoft, Nvidia, Tesla, and Meta) stocks also performed poorly."

Currently, concerns about "overheating" are mounting in the global stock market. Kim pointed out, "The S&P 500's 12-month forward price-to-earnings ratio (PER) exceeds 22 times. While this is lower than the 24.5 times seen during the early 2000s IT bubble, it is still high enough to create valuation pressure."

The so-called "Buffett Indicator," which compares market capitalization to nominal GDP, has also contributed to overheating concerns. The Buffett Indicator is currently above 180%. Kim explained, "The US is experiencing a government shutdown, and with no solution in sight, the addition of Trump-related risks has quickly spread anxiety throughout the market."

He also noted, "The first US-China trade dispute in 2018 triggered a global economic slowdown, so current concerns have deepened." He added, "Coincidentally, US economic indicators are starting to show weakness, and the release of key data such as employment and inflation, which have significant market impact, is being delayed due to the shutdown."

Regarding strategies for the Korean stock market, Kim emphasized, "At times like this, it is even more important to focus on leading stocks with strong earnings. While volatility will persist, there is not enough evidence to say that the direction of leading stocks has reversed." He added, "I do not think it is time to reduce exposure to the IT sector, which is currently driving the Korean market. It will still be advantageous to increase exposure at lower prices during this correction phase."