The KOSPI index has fallen below 7000 for the first time in over two months, but analysts from various securities firms assert that this does not indicate a transition to a bear market. They believe the recent drop is more a result of short-term supply and demand shocks rather than a decline in corporate earnings. While the market has entered an oversold phase, analysts maintain that the long-term upward trend remains intact.
In a weekly report on July 13, global investment bank Goldman Sachs noted that the KOSPI's 12-month forward price-to-earnings ratio (PER) has dropped to 6.2, the lowest level since 2004. They described this as an attractive risk-reward scenario from a valuation perspective. Morgan Stanley also pointed out that over 70% of KOSPI-listed companies are trading below a price-to-book ratio (PBR) of 1, maintaining a target of 12,000 for the KOSPI.
Domestic securities firms attribute the recent decline more to investor sentiment and supply and demand factors than to corporate performance. Kim Do-eon, a researcher at Hana Securities, stated, "The current adjustment is more akin to a rebalancing process following an initial rise, rather than the start of a bear market. Foreign selling, the National Pension Service's rebalancing, and a slowdown in individual liquidity are delaying the index's recovery, but the direction of semiconductor profits has not yet turned negative." He added, "The current market issue is supply and demand rather than earnings," suggesting that this adjustment could be a preparatory phase for a second upward movement.
However, there are concerns about further volatility. Kang Jin-hyuk, a senior researcher at Shinhan Investment Corp., noted, "The KOSPI is approaching the 50% retracement level of its gains since the end of March," and warned that the potential for an undershooting due to supply and demand dynamics remains. Conversely, Daishin Securities stated, "There is no disruption in fundamentals such as earnings and economic outlook," predicting that the KOSPI's 12-month forward PER has entered a historically undervalued range, which should support the market as the second-quarter earnings season begins.
Hwang Seung-taek, head of research at Hana Securities, explained that the recent adjustment is primarily due to concerns about the memory semiconductor market and deteriorating investor sentiment. He noted that foreign selling and other supply issues have increased volatility, leading to heightened fatigue and risk-averse sentiment among market participants.
* This article has been translated by AI.
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