[Weekend Money] Next Week's Stock Market: Focus on 'Earnings' Over Politics

The Only Variable for the Federal Reserve Is the Next Chair
'Leveling' Between Undervalued Stocks and Earnings Remains Valid

The KOSPI has officially surpassed the 5,000-point mark, ushering in the era of the 'dream index.' Semiconductors and automobiles, powered by artificial intelligence (AI) and robotics, are driving the index to new historic highs. In the securities industry, experts now advise focusing on tangible earnings rather than betting on liquidity expectations driven by political uncertainty.

On February 1, Jung Hae-chang and Lee Kyung-min, researchers at Daishin Securities, emphasized, "For the time being, expectations for liquidity fall within the realm of politics," adding, "Additional returns should be sought through earnings season strategies and responding to sector rotation."

The Federal Open Market Committee (FOMC) meeting in January provided relief to the market. The Federal Reserve expressed confidence in the United States' robust economic growth and its ability to maintain low unemployment. Regarding recent inflation concerns, the Fed clarified that these stemmed from one-off tariff effects rather than a surge in demand, indicating that upward pressure on prices would remain limited. The employment data to be released next week is also not expected to raise significant market concerns.

However, the only variable is 'people.' Researcher Jung pointed out, "Currently, the only factor that could alter annual monetary policy expectations is the appointment of the next Federal Reserve Chair," adding, "All four current candidates are strong contenders, and depending on the chair's disposition and independence, market expectations in the financial sector could shift."

The fundamentals of the Korean economy are showing positive signs. The export and import data for January, which will be released on March 1, is expected to surge by as much as 30.1 percent compared to the same period last year. The clear engine behind this robust growth is semiconductors. Strong AI-driven demand is propelling the semiconductor cycle and lifting the KOSPI's overall earnings per share (EPS) outlook.

As the fourth-quarter earnings season gets underway in earnest, the market is expected to shift toward 'sector rotation.' With major companies in secondary batteries, shipbuilding and defense, finance, pharmaceuticals, and retail set to release their earnings reports before the Lunar New Year holiday, the process of 'leveling' between stocks that have already seen significant price increases and those that remain undervalued relative to their earnings is likely to accelerate.

Daishin Securities analyzed that the KOSPI's 12-month forward price-to-earnings ratio (PER) stands at 10.83, only slightly above the five-year average of 10.5, indicating that valuation pressure is not significant.