[Good Morning Market] KOSPI Seen Starting Higher After Lunar New Year on Earnings and Liquidity

On February 19, after the Lunar New Year holiday, the Korean stock market is expected to open higher, powered by semiconductor-led corporate earnings, attractive valuations (price levels relative to earnings), and abundant domestic and external liquidity.

On this day, Lee Seonghun, a researcher at Kiwoom Securities, said, "There were no external events during the holiday period that could undermine the direction of the domestic stock market," adding, "During this period, the Philadelphia Semiconductor Index in the United States and the iShares MSCI Korea ETF (EWY) each rose by 1.6%, which suggests that the domestic stock market will start higher today."

The researcher continued, "From a medium-term perspective as well, the drivers for gains remain intact," and emphasized, "Based on earnings improvement led by semiconductors, Korea's 12-month forward price-to-earnings ratio (PER) is currently 8.8 times, below the 10-year historical average of 10 times, and Korea's valuation appeal is the strongest even when compared with major countries."

According to Goldman Sachs, net buying in Asian stock markets last week reached its highest level since data collection began in 2016. Funds that had concentrated in U.S. tech stocks over the past three years are now rotating into Asian equities, and the Korean stock market is drawing attention as the biggest beneficiary within the artificial intelligence (AI) infrastructure cycle.

The researcher said, "Considering that the won-dollar exchange rate is also remaining stable in the 1,440 won range per dollar, additional foreign inflows into the Korean equity market, where earnings expectations are overwhelmingly strong compared with other major markets, are likely to continue," and explained, "The combination of earnings, valuation, domestic and external liquidity conditions, and government policy is expected to serve as the main engine for further gains in the KOSPI."

On the 13th during trading hours, an employee in the dealing room at Hana Bank's Seoul headquarters is monitoring the stock market and exchange rates. Photo by Cho Yongjun

Meanwhile, on February 18 (local time), the New York stock market in the United States managed to rebound for a second consecutive day. On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 129.47 points (0.26%) from the previous session to close at 49,662.66. The large-cap-focused S&P 500 Index climbed 0.567% to 6,881.31, and the tech-heavy Nasdaq Composite Index ended the session up 0.78% at 22,753.64.

The market reacted sensitively to the minutes of the January Federal Open Market Committee (FOMC) meeting. Some members noted that if inflation continues to run above target, an upward adjustment of interest rates could be appropriate, and stock prices subsequently gave back part of their earlier gains.

By sector, all groups rose except for defensive sectors such as utilities, real estate, and consumer staples. Energy gained 2%, and consumer discretionary rose 1%. Among individual stocks, Nvidia jumped about 2% on news that it had signed a multi-billion-dollar supply contract with Meta. Amazon rose 2% after reports that billionaire investor Bill Ackman had increased his stake. Micron shares also advanced 5.3%.