[Good Morning Market] Another Round of "Trump Noise"... Will the KOSPI Take a Breather?

On October 22, the domestic stock market is expected to show sectoral differentiation as it digests concerns over a short-term peak in the KOSPI, noise surrounding the US-China summit, and the aftermath of Netflix's earnings shock.

Previously, on October 21 (local time), the New York Stock Exchange closed mixed as the third-quarter earnings season got off to a solid start, but concerns arose over the potential cancellation of the US-China summit. The blue-chip Dow Jones Industrial Average closed at a record high of 46,924.74, up 218.16 points (0.47%) from the previous session. The large-cap S&P 500 Index edged up by 0.22 points (less than 0.1%) to 6,735.35, while the tech-heavy Nasdaq Index fell by 36.877 points (0.16%) to 22,953.666.

A trader working on the floor of the New York Stock Exchange (NYSE). Photo by Reuters Yonhap News

Seo Sangyoung, a researcher at Mirae Asset Securities, commented, "The reason the market is reacting sensitively to a single remark by US President Donald Trump about the possibility that the US-China summit may not take place is that fluctuations continue depending on the concentration of 'herding behavior' not only in stocks but also in various financial products, including gold." He added, "The stock market now needs to deliver results that justify its current level."

This is a key point for the domestic stock market as well, which has been rallying recently on expectations of easing US-China tariff tensions and Apple hitting new record highs. Lee Sunghoon, a researcher at Kiwoom Securities, said, "Today, the domestic stock market is expected to open lower due to short-term peak concerns, noise regarding the US-China summit, a decline in the Philadelphia Semiconductor Index, and the aftermath of Netflix's earnings shock. However, sectoral differentiation is likely to emerge, with profit-taking in semiconductors and positive earnings from automakers such as General Motors."

The previous day, the KOSPI failed to break through the 3,900 mark as foreigners took profits, but there is a prevailing sentiment in the market that reaching 4,000 is only a matter of time. This optimism is fueled by expectations that the KOSPI's earnings growth cycle, led by semiconductors, will continue. As of the end of last month, the 2025 KOSPI operating profit consensus (market expectations) was 285 trillion won, but it has since risen about 1.4% to the 290 trillion won range. Over the same period, the 2026 consensus was revised upward by about 5.8%, from 350 trillion won to the 370 trillion won range.

With strong earnings momentum, securities firms are raising their targets for the index. Yang Ilwoo, a researcher at Samsung Securities, stated, "The KOSPI's return on equity (ROE) has reached 10%, surpassing the ROEs of Japan (TOPIX), Singapore (STI), and the Shanghai Composite Index, which remain at 9.4% to 9.9%. However, the price-to-book ratios (PBR) of those markets are still higher than the KOSPI, trading at 1.32 to 1.47 times." He raised the KOSPI band for the remainder of the year to 3,600-4,050.

However, some caution that the market may be experiencing short-term overheating. Researcher Lee pointed out, "While the medium-term upward trend remains valid in terms of earnings and valuation, it is important to note that the market is becoming overheated in the short term, particularly due to concentration in certain large-cap stocks." He added, "In the short term, rather than focusing on stocks that have already surged (such as semiconductors and secondary batteries), it may be an alternative to pay attention to sectors like bio (4.5%), banks (1.3%), hotels and leisure (-3.4%), which have shown solid earnings momentum but have underperformed the KOSPI (11.7%) since October, as well as the KOSDAQ (3.6%)."