'4,000p' breakout within sight…"Buy on dips amid profit-taking" [Weekly Outlook]

NH "KOSPI 3650~3950" projection

Korea-U.S. trade talks delay keeps caution high

Expectations for liquidity easing from a U.S. rate cut

Investor deposits exceeding 80 trillion won also provide downside support

"Focus on stocks with weak returns and undervaluation"

Securities firms expect the domestic market to face profit-taking pressure this week (27–31). Investors are also likely to remain cautious ahead of Korea-U.S. trade talks and the U.S.-China summit. However, analysts say expectations of liquidity easing from a U.S. rate cut and abundant idle funds within the market will provide downside support. They advise that corrections should be seen as buying opportunities.

According to the financial investment industry on the 26th, NH Investment & Securities presented this week's KOSPI index expected range as 3650–3950. Compared with the all-time high of 3941.59 recorded on the last trading day of the previous week, the maximum upside is only 0.21%. As the KOSPI index rose more than 500 points in just this month alone and hit record highs day after day, investors' desire to realize gains has increased. Najeong-hwan Na, a researcher at NH Investment & Securities, explained, "With the KOSPI index having risen sharply in the short term, there is a flow that uses Korea-U.S. tariff uncertainties as an excuse for profit-taking."

Seok-hyun Park, a researcher in the Investment Product Strategy Department at Woori Bank, said, "The strength of the semiconductor sector, which accounts for 30.6% of KOSPI market capitalization, is based on earnings forecasts that are being revised sharply upward, so I don't judge the price rise to be bubbly," but added, "It is necessary to be mindful of the aftereffects of rapid price increases over a short period."

Ahead of the Asia-Pacific Economic Cooperation (APEC) summit this week, uncertainty surrounding Korea-U.S. trade talks is also expected to be a factor that increases index volatility. The key is whether U.S. President Donald Trump will accept South Korea's proposal for investment in the U.S. Recently, a plan has been discussed in which South Korea would invest $25 billion per year in cash for eight years, totaling $200 billion, while the remaining $150 billion would be invested through credit guarantees and loans. Attention will also be paid to whether signs of easing tensions between the U.S. and China emerge during the U.S.-China summit held during APEC.

Researcher Park said, "If the Korea-U.S. trade talks and the U.S.-China summit, for which optimistic expectations have been priced in, are perceived as negative exposures, they could become a pretext for profit-taking."

Hee-chan Jeong, a researcher at Samsung Futures, said, "If progress is made toward easing tensions between the U.S. and China at the summit, a rally through year-end becomes more likely," adding, "In the opposite case, concerns about a trade war could worsen investor sentiment."

However, with the U.S. Federal Reserve (Fed) expected to cut interest rates at the Federal Open Market Committee (FOMC) meeting on the 30th, expectations for liquidity easing and foreign capital inflows remain. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the Fed is priced in at a 98.9% chance of lowering the policy rate by 0.25 percentage points this month.

Although the won is weakening, securities industry analysts say a reversal is possible given improvements in the trade balance and economic fundamentals. According to the Korea Customs Service, the average daily export value, taking into account working days from the 1st to the 20th of this month, was $2.87 billion, a 9.7% increase from the same period a year earlier.

Even if sell orders for profit-taking are released, abundant idle funds in the market are expected to flow in and support index rises. According to the Korea Financial Investment Association, as of the 23rd, investor deposits amounted to 80.1684 trillion won, a 40.5% surge from the beginning of the year (57.0583 trillion won). Therefore, it is advised to respond with buying whenever short-term adjustments occur.

Researcher Na analyzed, "The domestic market currently has high expectations for a bull market and abundant liquidity," adding, "Even stocks or sectors with poor annual returns can see strong net buying and price rises if any expectation of earnings improvement is found."

He added, "With the domestic financial market being modernized through the revision of the Commercial Act, the trend of resolving market discounts (undervaluation) is likely to continue," and concluded, "It is necessary to revisit sectors and stocks that have poor annual returns and are excessively undervalued in terms of valuation."

Ko Jeong-sam, Hankyung.com reporter jsk@hankyung.com