8,400→11,000→12,600… Why KOSPI Forecasts Are Rising [Weekend Money]

Samsung Securities Raises Year-End KOSPI Band Upper Limit Semiconductor Profit Momentum Expected to Continue Into Q3

Samsung Securities has raised its year-end KOSPI band upper limit from 11,000 to 12,600.

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As of June 25, Samsung Securities’ year-end KOSPI band upper limit stands at 12,600. The company has been rapidly revising its upper target, moving from 8,400 on May 4 to 11,000 on May 26. Yang Ilwoo, a researcher at Samsung Securities, explained, “Given that Korea’s 12-month forward return on equity (ROE) has now surpassed that of the S&P 500 Index in the United States, this is a fully justifiable valuation.”The profit momentum in the IT and hardware sectors is a global phenomenon. Yang noted, “The sectors experiencing profit momentum in global stock markets are IT and financials. As the process of materializing general intelligence continues, the valuation discount for IT and hardware is likely to narrow further.”In this context, the profit momentum for Korean semiconductor companies is also expected to continue in the second half of this year. Yang stated, “The profit momentum, which temporarily slowed, is highly likely to resume in the third quarter of this year,” adding, “Just as Apple raised its product prices in response to rising semiconductor costs, semiconductor prices are likely to remain stronger than market expectations in the second half of the year.”Of course, there are concerns about the excessive increase in capital raised by U.S. companies through borrowing or rights offerings. However, since the purpose of this fundraising is investment in artificial intelligence (AI), profit momentum in the Korean stock market is likely to persist regardless. Yang analyzed, “The net profit margin forecast for S&P 500 companies is at a record high of 16.1%, and the U.S. high-yield spread remains at a stable level, which means that big tech companies’ fundraising is not significantly affecting the fundraising abilities of lower-tier companies.”

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Meanwhile, Samsung Securities has set the lower end of the KOSPI band for the year at 8,400. Yang explained, “Currently, the 12-month forward ROE implied by the KOSPI’s price-to-book ratio (PBR) valuation at 2x is 13.2%. This calculation assumes that the KOSPI’s valuation is lower than that of the European stock market, which lacks an IT weighting,” adding, “At present, a scenario in which the KOSPI’s ROE falls below 13% is unlikely unless the global macroeconomic environment deteriorates significantly.”

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