The South Korean equity market will stay firm in the second half after a brief summer correction to extend the upward momentum throughout the first half next year, Daishin Securities projected in a live-streamed market forecast.
Chief analyst Lee Kyung-min of asset research in the presentation hosted by Maeil Business Newspaper and sponsored by the Korea Financial Investment Association projected the Kospi to hit 2,480 by the year-end led by chip, internet, battery, bio and pharma stocks. The Kospi finished Monday 0.79 percent higher at 2,217.86.
Lush liquidity from fiscal and monetary expansion will drive the bull at least until June next year, he said.
According to the data from Daishin Securities, monetary and fiscal stimuli of major economies amounted to 23.6 percent of their gross domestic products (GDP) on average from February to April. The U.S. broad M2 money supply grew 23 percent on year to hit a record high.
The huge fiscal spending is yet to bring about economic recovery, but investors’ hopes on economic turnaround and better performances of corporations would help drive the stock market in the second half, according to Lee.
Given current 12-month forward return on equity (ROE) of 6.9 percent for Kospi-listed firms and the Korean currency low of 1,220 won against the U.S. dollar, the Kospi would hover at 1,912.53. If the 12-month forward ROE is boosted to 8.2 percent on the back of earnings improvement in the latter half and the Korean won gains to 1,140 won against the greenback, the Kospi could reach 2,477.41, according to an analysis by Daishin Securities.
Lee recommended tech, semiconductor, biopharmaceutical and battery stocks, as they are expected to post their record-high earnings by 2022 amid changes in industrial structure. The promising companies included SK Hynix, LG Chem, Samsung SDI, Posco Chemical, Naver, Kakao, NCSoft, NHN, Samsung Biologics, Celltrion, Yuhan Corp. and Daewoong Pharma.
The securities firm estimated the 12-month forward price to earnings ratio (PER) of Kospi-listed companies to peak at 13.87 times for 2020 and fall to 9.84 times in 2021 and 8.79 times in 2022.
By Ahn Gab-seong and Choi Mira
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]