"Korean equities are currently tracking corporate earnings growth, so as long as earnings momentum continues, there shouldn't be much concern (about a market peak) — at least for the time being."
As the Kospi shakes off Middle East war jitters and extends its record-high rally day after day, analysts say an "earnings-driven differentiation" market centered on proven companies has become clearly visible. Some market participants are even voicing optimism that the Kospi could swiftly climb to the mid-7000s, supported not only by liquidity but also by solid corporate earnings power.
According to the Korea Exchange on the 27th, the Kospi closed at 6,615.03, up 139.40 points (2.15%) from the previous session, setting a new all-time high. The index briefly surged as high as 6,657.22 during the session. Individual investors took profits by selling nearly 1.9757 trillion won, while foreigners and institutions each net-purchased more than 1 trillion won to drive the rally. In the financial investment segment, large-scale funds flowed in mainly through exchange-traded funds (ETFs), supporting the buying momentum. The sharp rise in the index appears to have pushed retail investors toward ETFs amid the burden of picking individual stocks.
The rally, which has continued for nearly a week amid hopes for an end to the war, has been led by semiconductor stocks on the back of earnings improvement, spreading into a "sector rotation" market that now includes power equipment, construction and other industries. SK Hynix (000660), which posted record first-quarter earnings this year, drew a flood of bullish brokerage reports after its earnings release on the 23rd, and on Monday hit a new high of 1,292,000 won, up 5.73%. Samsung Electronics (005930) also closed up 2.28% at 224,500 won, though gains were capped by strike-related issues.
In the power equipment sector, Hyosung Heavy Industries (298040) and LS Electric posted double-digit gains. Hyosung Heavy Industries closed at 3,941,000 won, up 10.95% from the previous session on expectations for North American orders, and briefly surged to 4,006,000 won intraday. Shinhan Securities and SK Securities raised their target prices for Hyosung Heavy Industries to 4.2 million won and 4.7 million won, respectively. LS Electric also ended trading at 255,500 won, up 12.80%. Month-to-date gains for Hyosung Heavy Industries and LS Electric have reached 60.5% and 77.9%, respectively.
Holding companies also rallied on expectations of improved earnings at their subsidiaries. SK Square (402340) closed at 789,000 won, up 8.83% from the previous session. In addition, in the construction sector — buoyed by hopes for Middle East reconstruction — Daewoo E&C has soared 113.5% this month alone, far outpacing other construction stocks. Baek Young-chan, head of the research center at Sangsangin Securities, said, "Even within the same sector, we are seeing a stock-picking market where individual names diverge sharply," adding, "Gains are likely to continue to be led by companies with improving earnings and business conditions."
Some in the market say the blistering rally has brought the "Kospi 7,000" level within sight. After breaking through the 6,000 mark on the 15th at 6,091.39, the Kospi climbed 523.64 points (8.6%) in just eight trading sessions to settle above 6,600. From current levels, only an additional 384.97 points (5.8%) is needed to reach 7,000. Lee Jin-woo, head of research at Meritz Securities, said, "Earnings improvement is underpinning the stock rally, so valuation pressure is limited. Even if annual net profit stays in the high 500 trillion won range and a multiple of just 10 times is applied, there is room for the Kospi to rise to the mid-to-high 7,000s."
Still, external variables such as oil prices and interest rates remain a burden. With U.S.-Iran tensions continuing, upward pressure on international oil prices is intensifying. Goldman Sachs has raised its fourth-quarter Brent crude forecast to $90 per barrel. Rising oil prices could weigh on the market by stoking inflation and interest rates.
The upcoming Federal Open Market Committee (FOMC) meeting is seen as a key variable that will determine the direction of rates. At the FOMC meeting on the 28th and 29th (local time), the benchmark rate is likely to be held at the current 3.50–3.75% range. However, market attention is focused on whether rising oil prices and Middle East risks could rekindle inflation concerns, prompting the Federal Reserve to maintain a tightening stance or delay rate cuts.
Alongside the rate event, global equity variables are also at play. The "Magnificent 7" (M7) major big tech companies will report earnings this week. Alphabet, Meta, Amazon and Microsoft are scheduled to release results on the 29th, followed by Apple on the 30th. With the recent record highs in the S&P 500 and Nasdaq driven by AI-centered earnings expectations, market volatility could widen depending on the results. Kim Seung-hyuk, an analyst at Kiwoom Securities, said, "Confirmation of profitability in the AI investment cycle, combined with policy uncertainty ahead of the FOMC, could intensify differentiation across individual stocks."
In the Kospi 8,000 era, semiconductors may not be the main character. If you don't know 'this stock,' you'll be left behind.
