The stock market in September is showing mixed trends. The momentum that pushed indices toward 10,000 has long dissipated, with factors such as war, interest rates, and exchange rates contributing to increased volatility. In this chaotic environment, experts are offering various investment strategies.
Park Hee-chan, head of the product support division at Mirae Asset Securities, provided a clear diagnosis: "Now is the time to pause aggressive investments." He noted that while the domestic stock market has risen rapidly, driven by artificial intelligence (AI) and semiconductors, high interest rates and corporate investment burdens are likely to sustain volatility for the foreseeable future.
In a recent interview, Park, who has over 20 years of experience in macroeconomics and asset allocation at Mirae Asset Securities, emphasized the need for a balanced investment strategy. "Rather than focusing on specific themes, it is essential to invest in indices centered around the U.S. and appropriately divide investments between stocks and bonds," he said. He clarified, "This does not mean avoiding stocks altogether; within stocks, preference should be given to indices over individual themes, mixing various strategies to reduce volatility."
Korean Stock Market's High Dependence on Semiconductors and AI
Park highlighted the "high dependence on semiconductors" in the domestic stock market. He pointed out that while the U.S. S&P 500 and Nasdaq are also influenced by the performance of AI and semiconductors, their volatility is significantly lower compared to the Korean market. "The U.S. has a diverse industrial and corporate structure, whereas in Korea, large-cap semiconductor stocks like Samsung Electronics and SK Hynix have an overwhelmingly large impact on the index," he explained.
He added, "Even if sectors like cosmetics or biotech show positive trends, they cannot offset the volatility of Samsung Electronics and SK Hynix. Ultimately, the movements of large-cap semiconductor stocks are crucial for the Korean stock market."
Demand for AI is not expected to decline immediately, with memory demand likely to continue beyond 2027. However, Park emphasized that what determines stock prices is not just the absolute level of demand but the growth rate.
Concerns surrounding the AI industry are also reflected in companies' funding methods. He noted that while big tech companies managed large-scale capital investments using their cash flows in 2023-2024, interest in funding has increased since the second half of last year, particularly following Oracle's example. "As big tech companies begin to raise funds for AI investments through bond issuance and borrowing, the market is starting to evaluate how quickly these investments can translate into profits," he explained.
Park warned that by 2026, Google's free cash flow could turn negative, and by 2027, more companies may follow suit. In a high-interest environment with increasing borrowing, the profitability of AI investments will become critical. He anticipates that discussions about whether AI has peaked will intensify after next year.
Sustainability of Earnings More Important Than Valuation
Park believes that the current stock market valuation does not appear overly burdensome. Based on projected earnings for 2026-2027, the price-to-earnings ratio (PER) is not excessively high.
The concern lies beyond that period. He stated, "While the current valuation looks fine, the market is curious whether earnings can remain at this level in 2028 and 2029." He cautioned that it is not enough to feel secure just because valuations are low in the presence of actual earnings. Ultimately, the sustainability of future profits must be assessed.
His preference for U.S. stocks in asset allocation stems from this reasoning. It is not merely about return expectations but also about the higher level of 'trust' in the market. Park remarked, "There is a belief that even if something goes wrong in the U.S. market, it will eventually recover. Therefore, it is advisable to focus long-term asset allocation around the U.S."
Foreign Investors Likely to Rebalance at KOSPI 7000-8000
Regarding foreign investment, Park does not expect significant net buying in the short term. As the domestic stock market has risen rapidly, the proportion of Korean stocks in global portfolios has increased, leading foreign investors to sell for rebalancing.
He noted, "Currently, at the KOSPI 6000-7000 level, foreign investors are in a balanced state, neither buying aggressively nor selling significantly. However, if the index rises to 7000-8000, the situation could change." He explained that as the proportion of Korean stocks increases again, foreign investors may sell to rebalance their portfolios.
Park added, "Since the Korean stock market has already risen significantly, it will be difficult for foreign investors to increase their holdings unless other countries also rise, causing the relative weight of Korean stocks to decrease." This implies that for foreign investment flows to change direction, the global stock market must rise in tandem with the domestic market.
High Interest Rates Favor Short-Term Bonds Over Long-Term
Interest rates are also a crucial variable in future investment strategies. Park cited the expansion of fiscal deficits by developed countries and increased global investment as reasons for rising global interest rates.
He explained that AI-related capital investments are absorbing global liquidity. When big tech and related companies issue bonds for AI investments, more funds become tied up in the market for extended periods, which can burden the bond market.
Consequently, not all sectors benefit from rising interest rates. In a high-interest environment, growth stocks must also prove the profitability of large-scale investments. Park emphasized, "I do not foresee a major crisis like a financial meltdown occurring immediately, but now is not the time for aggressive investments."
Among sectors, he expressed a relative preference for consumer goods, which have strong defensive characteristics. Companies that do not require explosive growth may be more stable in a high-interest and volatile environment. In bonds, he favored short-term bonds over long-term ones, as rising interest rates could increase price volatility for long-term bonds.
ELS, Gold, and Brazilian Bonds as Diversification Tools
In a volatile market, equity-linked securities (ELS) can also serve as an investment alternative. As volatility increases, the conditions for ELS, such as coupons, may improve. He noted, "Recently, some ELS linked to Samsung Electronics and SK Hynix have formed conditions with high coupons and significant levels of price decline tolerance." However, he cautioned that "ELS can also incur principal losses if the underlying asset prices fall significantly, so it is essential to examine the structure carefully, and the investment proportion should not be too large."
Gold and Brazilian bonds were also suggested as alternatives. Park stated, "While the potential for U.S. interest rate hikes may pose a concern, global central banks, especially those in emerging markets, continue to reduce their dollar asset holdings and increase gold purchases." He mentioned that Brazilian bonds offer high interest rates of around 15% with no taxes, but they are also considered high-risk products.
He advised, "A good strategy might be to maintain a 60-40 split between stocks and bonds or adjust to a 50-50 ratio depending on market conditions. In a volatile environment like this, it is necessary to adopt an approach that grows assets steadily, even if it means lowering expected returns."
* This article has been translated by AI.
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