Hyundai Motor Securities Sees Kospi Revisiting 9,000 in Second Half of Next Year

Hyundai Motor Securities Sees Kospi Moving Sideways Near 7,000 in First Half, Then Rising in Second Half

Amid continued volatility in the stock market, Hyundai Motor Securities said on Oct. 26 that the Kospi could attempt to revisit its previous high around 9,000 in the second half of next year. The brokerage said a sustained rally could begin in June next year as the Federal Reserve ends its rate-hike cycle and investors regain confidence in earnings growth for semiconductor companies such as Samsung Electronics Co. and SK Hynix Inc. beyond 2028.

Kim Jae-seung, an analyst at Hyundai Motor Securities, wrote in a report released that day that the Kospi could begin a sustained uptrend from June next year. He cited rising market confidence in higher earnings forecasts for South Korea’s semiconductor sector after 2028 and the end of the Fed’s tightening cycle.

Kim said the Kospi would absorb major external events in November and build a floor, then trade sideways while approaching the 7,000 level through the first half of next year. In the second half, the index could break above the 7,000-8,000 range and challenge its previous peak of 9,000.

He identified confidence in the sustainability of semiconductor earnings as the key condition for a turn higher. The Kospi’s 12-month forward operating profit forecast is still trending upward, but stock prices have fallen first as market doubts about future earnings have grown.

Kim said the market remains concerned that high profits at memory-chip makers depend on price gains driven by supply shortages. Once production ramps up in earnest after 2028, memory prices and profit margins could fall, fueling concerns that current earnings levels may be hard to maintain. In his view, the Kospi would rise again when the market becomes convinced that earnings growth can continue beyond 2028.

The end of the Fed’s rate-hike cycle was also presented as a key turning point. Tight monetary conditions are likely to persist through the first half of next year, keeping US Treasury yields elevated and financial conditions restrictive. Once the hiking cycle ends, however, pressure from rates could gradually ease. Hyundai Motor Securities expects the Fed to stop raising rates in June next year.

In the near term, the focus is on whether the Kospi can break out of its downtrend and enter a bottoming phase. According to EpicAI, an AI-based investment information platform, the Kospi fell 20.8% to 5,550 on Oct. 23 from 7,003 on Oct. 2. The index also closed at 5,469.47 that day, down 1.46% from the previous session, as rebounds failed to hold and foreign investors continued net selling. Even so, it has held above its intraday low of 5,262 reached on July 29 despite headwinds such as rising oil prices and higher French government bond yields.

Kim said the conditions for a market bottom include reduced sensitivity to negative news, a slowdown in foreign net selling and easing external uncertainty. He also viewed it positively that foreign net selling last week was the smallest in the past four weeks.

He also cited next month’s US midterm elections, the possibility of a summit among the leaders of the US, China and Russia, and Anthropic’s initial public offering as key variables. US stocks tend to rise after midterm elections, he said, and a year-end rally in the US market could help improve sentiment toward the Kospi and support bottom formation.

One investor said the Kospi can unravel quickly once foreign investors start selling, no matter how strong earnings or market flows may be. Still, the investor said, if semiconductor earnings continue beyond 2028, the securities industry’s view that the Kospi could reach not only 9,000 but even 10,000 may not be far-fetched.

Another investor said sentiment could shift once the rate-hike cycle ends and semiconductor earnings growth is confirmed. The investor added that they hoped to see the Kospi move beyond 9,000 and even reach 10,000.

Kang Kyung-ju, Hankyung.com reporter, memory@hankyung.com