Korea Investment & Securities raised the upper end of its second-half KOSPI target band to 11,000 points, reinforcing its bullish outlook on the Korean stock market. The brokerage said earnings growth driven by an improving semiconductor cycle will serve as the key driver of further gains.
Kim Dae-jun, an analyst at Korea Investment & Securities, raised the second-half KOSPI ceiling to 11,000 points from the previous 9,250 points in a report released Tuesday. He cited corporate earnings improvement as the primary basis for the upward revision.
"The semiconductor industry, which has entered a super cycle, is generating massive profits and leading the market higher," Kim said. "The 12-month forward operating profit forecasts for Samsung Electronics (005930.KS) and SK hynix (000660.KS) will be revised upward by about 10% from previous estimates."
Accordingly, Korea Investment & Securities set its target price-to-earnings ratio (PER) for the KOSPI at 9.5 times for the second half. Given that the current 12-month forward PER stands at around 8.5 times, additional valuation expansion is possible, the brokerage explained.
"As earnings growth and multiple expansion proceed simultaneously, the upside potential for the index will widen," Kim said. "Earnings momentum in the semiconductor sector will help improve overall market sentiment."
Downside risks remain, however. Korea Investment & Securities projected that the KOSPI floor would form around 7,900 points under a scenario in which earnings momentum weakens and corporate profit forecasts are revised downward by approximately 10%. The analysis assumes the current PER level is maintained.
In terms of market trajectory, the brokerage expects strength in the second and third quarters, followed by a slowdown in the fourth quarter. While the semiconductor sector is likely to lead the market on the back of relatively solid earnings even in a high-inflation, high-interest-rate environment, external uncertainties could grow toward the year-end.
"In the fourth quarter, uncertainties related to the U.S. presidential election and supply-demand instability could weigh on investor sentiment," Kim said. "The leading sectors currently driving the market may also see their upward momentum gradually slow."
