Valuation Pressure, Earnings Hopes Leave Kospi Searching for Direction This Week

NH Investment & Securities Sees Kospi at 5,800-6,700 This Week

South Korean brokerages expect the Kospi to search for direction this week, from April 27 to April 30, as valuation pressure intersects with hopes for corporate earnings.

NH Investment & Securities said on April 26 that the Kospi is projected to move in a 5,800-6,700 range this week. “Stock prices are ultimately driven by earnings,” analyst Na Jung-hwan said.

The Kospi’s 12-month forward price-to-earnings ratio stands at 8.5 times, below its historical average, while its trailing price-to-book ratio is 1.99 times, near a record high, the firm said.

Na said the below-average PER indicates the market has already priced in a sharp rise in future earnings. The near-record PBR, he said, reflects both improving return on equity for semiconductor and artificial intelligence infrastructure plays and expectations for South Korea’s corporate value-up policy.

“That leaves the market looking cheap relative to earnings but expensive relative to capital, making it difficult to define simply as overvalued or undervalued,” Na said. He recommended keeping core positions in market leaders with proven earnings, including semiconductors, power equipment, nuclear power and defense, while selectively adding stocks in sectors where year-on-year ROE improvement is large and earnings gains are confirmed.

Earnings from major U.S. technology companies due this week may also influence South Korean stocks.

Shinhan Securities analyst Kang Jin-hyuk said Alphabet, Meta Platforms, Microsoft and Amazon.com are scheduled to report this week. Guidance on artificial intelligence capital spending will be the key indicator, he said, because it affects the broader AI value chain, including semiconductors, power equipment and energy.

Major South Korean companies are also set to report. Samsung SDI, Hyundai Engineering & Construction and HD Hyundai Electric will release earnings on April 28, followed by Samsung Electro-Mechanics, LG Energy Solution and Hanwha Aerospace on April 29.

Those results should help investors gauge whether strong conditions in shipbuilding, defense and power equipment are continuing, Kang said. He added that investors also need to check earnings from battery makers, whose shares have already priced in expectations for a sharp turnaround.

The Federal Reserve’s Federal Open Market Committee meeting is also in focus. Investors will watch the wording of the statement and any comments by Chair Jerome Powell on oil prices. Consensus forecasts call for rates to remain unchanged.

Na said West Texas Intermediate crude remains above year-earlier levels, making the Fed’s description of oil-driven inflation risk a key issue. If global oil prices stabilize, the door could remain open to resumed rate cuts in the second half, which could support equities.

Powell’s term expires on May 15. He will continue serving as chair until Kevin Warsh, the nominee for the next chair, is confirmed. Senator Thom Tillis, a Republican on the Senate Banking Committee, has said he would block a Senate vote until the Justice Department completes its investigation into Powell, arguing that Federal Reserve renovation costs exceeded budget.

Lee Su, Hankyung.com reporter, 2su@hankyung.com