'Big events' digested as KOSPI rose above the 4,100 level…seeking direction [Weekly Outlook]

NH Investment & Securities "This week KOSPI expected to fluctuate between 3,900 and 4,100"

"Rotation expected from semiconductors to defense, securities, and biotech"

Brokers expect that this week (3–7) the KOSPI index will continue to contest around the 4,000 level as it tests expectations for U.S. rate cuts and profit-taking selling.

NH Investment & Securities on the 2nd presented an expected KOSPI range of 3,900–4,100 for this week. Analyst Na Jeong-hwan at the firm said, "The global liquidity expansion trend will act as a factor supporting the KOSPI, but the partial reduction in expectations for a U.S. rate cut and the possibility of profit-taking selling could act as downside factors."

Last week the KOSPI digested "big events" such as the Korea-U.S. summit, the Korea-China summit, and the U.S.-China summit and for the first time closed above the 4,100 level. In particular, the domestic 'semiconductor top two,' Samsung Electronics and SK hynix, posted results that exceeded market expectations, and the sector's strong stock performance contributed to the index's rise. In addition, expectations for an 'AI alliance' between U.S. AI leader Nvidia and domestic companies also fueled optimism.

This week, earnings from U.S. tech companies such as Palantir, AMD, and Qualcomm remain, so the market may once again focus on whether AI companies will see profitability and capital expenditure expansion.

Also, Federal Reserve Chair Jerome Powell's 'cautious stance'—saying that "an additional rate cut in December is not a foregone conclusion"—left tension in the market and is seen as a factor that could limit the KOSPI's upside.

Analyst Na said, "Chairman Powell's remarks do not mean he will not cut rates in December, but that he will decide based on inflation and employment data," adding, "This week the market is likely to focus on inflation and employment-related data that could affect the direction of rates."

As an inflation-related indicator, the U.S. Institute for Supply Management (ISM) manufacturing index will be released on the 4th (local time). As for employment indicators, with the U.S. federal government's 'shutdown' delaying the official employment report, ADP's weekly employment snapshot (5th), regarded as an alternative indicator, is scheduled.

In the domestic market, there is analysis that sector-by-sector catch-up trading may emerge. This is because the KOSPI has risen about 20% this month alone, led by semiconductors, creating a short-term rapid-rise burden.

Lee Kyung-min, an analyst at Daishin Securities, said, "The KOSPI's forward price-earnings ratio (PER) has reached 12 times; while this is not high compared with global levels, considering the one-year average standard deviation it is true that there was a short-term sharp rise," and added, "As earnings announcements from defense, software, securities, and pharmaceutical companies continue, rotation could strengthen."

They analyzed that during adjustments, a buy-the-dip strategy would be more effective than reducing stock allocations.

Yu Myung-gan, an analyst at Mirae Asset Securities, said, "An expansion of shareholder returns and improved profitability could sustain an upward trend in the price-to-book ratio (PBR), and if further upward revisions to semiconductor earnings are reflected, PER could become lower," adding, "We judge that the market's valuation attractiveness remains high."

The analyst also said, "In a phase of cooling, a breather and duration adjustment may occur," adding, "Despite the KOSPI's march to record highs, because the margin balance ratio remains stable, we judge that the market's long-term uptrend is ongoing."

No Jeong-dong, Hankyung.com reporter dong2@hankyung.com