Research heads at major Korean securities firms forecast that U.S. and Israeli airstrikes on Iran will have limited impact on the domestic stock market. They assessed the situation would only increase short-term volatility unless the U.S.-Iran conflict becomes prolonged and the Strait of Hormuz is actually blocked.
The Seoul Economic Daily conducted an emergency market diagnosis with four research center heads at major securities firms on the 2nd. The prevailing view was that the "Iran situation" would not significantly affect the Korean stock market.
"Since the KOSPI has surged rapidly, even if short-term corrections occur, they would be due to risk-averse sentiment," said Lee Jin-woo, head of Meritz Securities Research Center. "Whether tensions between the U.S. and Iran calm down in the short term will be the key measure."
Hwang Seung-taek, head of Hana Securities Research Center, noted that "the Korean stock market has strong fundamentals, so while there may be short-term volatility, there won't be significant changes from a long-term perspective." However, he added, "If the Iran situation drags on and leads to a Strait of Hormuz blockade pushing oil prices higher, the correction phase could extend."
Historically, during geopolitical conflicts, stock markets have corrected by up to 10% before recovering to recoup previous losses.
Focus on Semiconductors as Market Leaders
The research heads recommended "building portfolios centered on leading stocks" as a post-KOSPI 6000 investment strategy. With the domestic market ending its seven-day winning streak on the 27th of last month and Middle East tensions rising, they judged that investing in market leaders would minimize related uncertainties.
"Semiconductor companies account for a significant portion of the domestic market, and profit forecasts for the semiconductor sector are rising 20-25% above consensus," said Yang Ji-hwan, head of Daishin Securities Research Center. "Considering the upward revisions, 6,500 is fully achievable, and with accumulated confidence, I expect the market to reach the mid-7,000 range within the year."
From this perspective, they advised increasing portfolio weightings in semiconductors—the sector that has driven the Korean market. Since the market rose centered on semiconductor stocks, they expect any resumption of the rally to strengthen from semiconductor stocks.
According to FnGuide, Samsung Electronics' estimated annual operating profit for this year stood at 179.76 trillion won as of February 26, up 48% from 121.63 trillion won a month earlier. SK Hynix's estimate rose 57% to 153.51 trillion won from 98.03 trillion won over the same period.
"Semiconductor stocks are currently both the biggest gainers and structurally undervalued," said Kim Hak-gyun, head of Shinyoung Securities Research Center. "Just seven or eight months ago, the term 'Samsung Electronics phobia' was circulating, but quality assets level up over time—as evidenced by breaking through 210,000 won."
Caution Against Margin Trading; Consider ETF Diversification
The research heads also warned against excessive margin trading driven by FOMO (fear of missing out). According to the Korea Securities Depository's SEIBro, margin trading loan balances and deposits reached record highs of 32.37 trillion won and 119.48 trillion won respectively as of the 26th of last month.
"Given the pace of market gains, it's wise to maintain some stock exposure in your portfolio while diversifying into other assets," Lee said. "With forecasting this unprecedented bull market being difficult, investors shouldn't go all-in on stocks alone."
For those uncomfortable with individual stocks that have surged rapidly, they recommended exchange-traded funds (ETFs) that allow diversified investment across various stocks in related sectors. Individual investors find it difficult to analyze each company, but ETF products invest in various companies within specific industries, enabling stable investment while minimizing risk.
"Semiconductor ETFs listed on the stock market have Samsung Electronics and SK Hynix weightings exceeding 40%," Yang said. "Buying semiconductor ETFs means your returns move with individual stock prices."
Particularly for new investors who find it difficult to enter at the KOSPI 6,200 level, they suggested ETFs as an "easy investment" option. "ETFs have a strong passive investment character," Kim advised. "Given that the domestic market is undergoing structural improvement, I recommend ETFs that invest in the benchmark KOSPI index through regular contributions."