KOSPI Likely to Continue 'Breather'…Brokerage Community Calls It a 'Buy-the-Dip' Opportunity [Weekly Outlook]

The KOSPI index gave up the 4,000 level after a sharp adjustment on the 7th. However, the brokerage community still says it is in a secular bull market phase and advises treating the correction as a buy-the-dip opportunity.

According to the Korea Exchange on the 9th, last week (3~7) the KOSPI closed at 3,953.76, down 3.74%. The drop from the record closing high of 4,221.87 recorded on the 3rd was 6.35%.

Analysts say the market ignored risk factors as major positive catalysts came one after another before the record high. Lee Kyung-min, a researcher at Daishin Securities, cited risk factors that the stock market had been ignoring, including △the U.S. central bank (Fed) delaying a decision on easing monetary policy △valuation pressure on artificial intelligence (AI) companies (stock price relative to earnings) △a prolonged U.S. federal government shutdown (shutdown).

He predicted, "Next week, with relatively absent upward momentum and expectations, the process of digesting sell orders is likely to continue."

However, Na Jeong-hwan of NH Investment & Securities said, "The earnings momentum of the leading stocks this year remains valid," and added, "It is necessary to use the recent price correction as an opportunity to increase the weight of leading stocks or to check the short-term upside potential of sectors that have been neglected."

In fact, through the correction the KOSPI's 12-month forward price-to-earnings ratio (PER) fell from a peak of 12.8 times to 10.8 times, easing valuation pressure.

Lee pointed out that it is worth paying attention to the consumer goods sector, which had been neglected in the market for some time. He said, "Singles' Day, a Chinese shopping event, will be held on November 11," adding, "Momentum could flow in depending on domestic brands' exposure and sales rankings."

How much retail investors will absorb foreign selling is also critical. Kang Jin-hyeok, a researcher at Shinhan Investment Corp., said, "Securities firms' customer deposits have hit an all-time high. Individual interest in the stock market is increasing," and added, "Foreign selling may continue while awaiting positive factors such as earnings announcements from companies in the AI value chain or an end to the U.S. shutdown, but individual demand could support the bottom." As of after market close on the 5th, customer deposits stood at KRW 88,270,800,000,000, up 15.47% from the end of September (KRW 76,447,400,000,000).

Domestically, the third amendment to the Commercial Act could become a momentum for a market rebound. The National Assembly's Strategy and Finance Committee is scheduled to begin review of budget-related bills from the 13th.

Na Jeong-hwan of NH Investment & Securities said, "The key issue is separate taxation of dividend income, and discussions are ongoing over the current top tax rate," adding, "The opposition argues that the top rate should be lowered to 25% to encourage higher corporate dividend payout ratios, and the ruling party's KOSPI5000 Special Committee has expressed the same position."

Han Kyung-woo, Hankyung.com reporter case@hankyung.com