[Weekend Money] "AI, AI, How High Do You Think the KOSPI Will Go?"

78% Probability of Market Gains Over the Next Three Months
The Key Driver Is "Earnings," Not "Price"

"Should I sell now, or should I hold on longer?" As the KOSPI surpassed the 6000 mark, more domestic retail investors are asking when the peak will arrive. In the securities industry, a new report based on an artificial intelligence (AI) probability model has concluded that "this is not yet a time to worry about a market reversal."

According to Shinhan Investment Corp., researcher Lee Jeongbin recently analyzed that "based on the AI probability model, the probability of the Korean stock market rising within the next three months is as high as 78.3%." He stated, "Now is not the time to reduce your holdings; rather, it is a period to follow the trend based on the numbers."

On the 25th, when the KOSPI closed above the 6000 mark for the first time in history, employees were celebrating in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. Photo by Jo Yongjun

Lee explained that instead of judging whether the market has peaked solely based on the scale of the stock price increase, one must also consider how long the upward trend has continued and whether the momentum remains intact. To do so, he evaluated the market by dividing it into four phases (recovery, expansion, contraction, and recession) using a combination of stock prices, corporate earnings, and macro-financial indicators. As a result, he concluded that it is difficult to view the current trend as having reversed, and that there is a high probability the expansion phase will persist.

The report cites the unprecedented pace of earnings growth as the core driver for further gains in the stock market. Operating profits and margins in the semiconductor sector are reaching levels never seen before, and sales growth in order-based industries such as shipbuilding, defense, and power equipment continues. He explained, "This cycle is not about multiple expansion, such as price-to-earnings ratio (PER), but rather about share prices rising as companies actually earn more money."

From a valuation perspective (the level of share prices relative to corporate value), the Korean stock market still remains attractive. The KOSPI's 12-month forward price-to-earnings ratio stands at 10.1x, which is lower than the historical peak of 14.6x, while the price-to-book ratio (PBR) is also at 1.6x, which is not burdensome compared to the improving return on equity (ROE). Lee added, "Even compared to Taiwan (PBR 3.5x), which has a similar industrial structure, or Japan, Korea still offers attractive pricing."

Strategically, he recommended a differentiated approach to the KOSPI and KOSDAQ. For the KOSPI, where earnings visibility is high, he advised a large-cap centered strategy (KOSPI 200) and focusing on high-beta (high volatility, aggressive) stocks, actively including semiconductors and industrials. In contrast, he defined KOSDAQ as an "alpha source market" where supply-demand and policy are crucial, and recommended growth stocks among IT components, materials, and equipment companies whose short-term earnings forecasts are being revised upward.

However, Lee also noted risk factors to watch for in the future, including a slowdown in KOSPI earnings momentum, a reversal in foreign investor flows, and a sharp increase in the downside probability of his model to over 40%.

This content was produced with the assistance of AI translation services.