Korea Investment & Securities "KOSPI lacks direction... lowered 3rd quarter profit forecast"

A meaningful turnaround in sentiment is only possible if the U.S. CPI falls below expectations this week.

(Seoul = Yonhap News) Reporter Lim Eun-jin = Korea Investment & Securities predicted that although the KOSPI has recently shown a lack of direction, investment sentiment may improve if the US core consumer price index (CPI), which will be announced this week, declines.

Researcher Kim Dae-jun pointed out in a report on the 12th, “After the holidays, KOSPI entered a clear stagnation phase where supply and demand and performance slowdown were intertwined.”

In particular, he pointed out, "As of the 8th, KOSPI's operating profit forecast for the third quarter was 267.5 trillion won, which has been revised downward for five consecutive weeks since 277.3 trillion won on September 4," and "the average weekly trading value also dropped 63.8% from the year's high point of 59.9 trillion won to only 21.7 trillion won."

At the same time, he said, "A meaningful reversal will only be possible if the U.S. September CPI and Producer Price Index (PPI) scheduled for this week fall below market expectations," and added, "It is difficult to expect a trend rebound in the index until the indicators are confirmed, and a thorough response to the range is inevitable."

However, he predicted that “the real focus of the market is on core prices, excluding energy volatility,” and that “the core CPI, which stimulated the hawkish stance of the FOMC (Federal Open Market Committee) in September, will rise only 0.2%, slower than 0.3% the previous month.”

Here, he said, "Recently, the WTI (US West Texas Intermediate) oil price has turned downward from its high point, and the number of crude oil drilling equipment across the United States has increased to 603 (358 in the shale oil region), and supply expansion through oil well development is visible." He added, "Refined oil volatility remains, but diplomatic and political pressure to ease geopolitical tensions and allowing the supply of Russian diesel will gradually ease the supply crisis."

Accordingly, he predicted, “If the supply shock is gradually resolved, the price rise and the justification for austerity triggered by high oil prices will naturally weaken,” and “Ultimately, the slowing of inflation pressure from supply will serve as a decisive opportunity to weaken the intensity of monetary tightening.”

He said, "The preemptive response strategy in the current situation is to pay attention to 'high PER (price-to-earnings ratio) industries' that have been most burdened with discount rates due to prolonged tightening." He added, "Among the major KOSPI industries, the industries with high 12-month forward PER are secondary batteries, hardware, and machinery, and a positive view is needed on them."