Many investors have been left confused over how far the benchmark KOSPI rally would go amid sharply conflicting market views for next year, with forecasts from major brokerages differing by as much as 3,000 points, market watchers said Tuesday.
The wide difference highlights uncertainty over the global and Korean economies, calling into question the motives of the brokerages, whose profits are tied closely to retail investors’ equity trading volume.
Also doubtful is their credibility, since many said in their 2024 year-end forecasts that the KOSPI this year could be limited to less than 3,000 points.
KB Securities is forecasting the highest figure of 7,500 points, based on the government’s financial market reform efforts, tax revisions and semiconductor supercycle, whereas Kiwoom Securities sees the index being limited to 4,500, hamstrung by global inflation risks and trade tensions.
KB said in a report that the current bullish market sentiment was similar to the early stage of an extended market boom in 1984, when the combination of low interest rates, a weak dollar and low oil prices boosted the equity market.
“This is not just a short-term rebound. It could be the start of a decades-long bull market,” the report said. “Strong corporate earnings and cheap valuations remain attractive to foreign investors, likely to keep bringing them to the Korean stock market.”
The report pointed to the KOSPI’s price-to-book ratio currently standing at just 1.4, far below the global average of 3.5, an indication of wild undervaluation.
“The previous months of rally notwithstanding, the Korean market remains undervalued,” the report said. “We expect the KOSPI to continue to be a major long-term investment source in the months to come.”
However, Kiwoom said the months of strong performance could be instantly derailed by geopolitical uncertainty.
“The rally has been sustained largely by semiconductor shares. External shocks such as higher commodity prices, renewed tariffs uncertainties and supply disruptions could wipe out investor sentiment.”
More concerning, it added, is the deepening polarization within the listed firms, as indicated by government policies prioritizing semiconductors and artificial intelligence industries as the chief beneficiaries of state-driven investments and growth strategies.
Traditional manufacturing sectors, on the other hand, are likely to remain sluggish, with little prospect strong earnings leading to share price increases.
