As the KOSPI plunged so sharply that circuit breakers were triggered for two consecutive days, eventually collapsing below the 6,000 mark, analyses from the brokerage sector have emerged in succession suggesting that signs of passing the market bottom are actually appearing.
Securities firms diagnosed that the current stock market has entered an oversold zone where fear psychology precedes corporate earnings.
DS Investment & Securities analyzed that considering the possibility of resumed negotiations between the United States and Iran, additional U.S. responses, and solid corporate earnings, it is a phase where people should prepare for the possibility of a rebound rather than betting on further declines.
The firm explained that since the KOSPI's price-to-book ratio (PBR) is currently below 1x, it has entered a price range where strong rebounds have historically occurred unless there is an extreme situation like the global financial crisis.
Yuanta Securities also evaluated that the KOSPI has been showing signs of passing its bottom since the circuit breaker was triggered the day before yesterday.
It noted that the KOSPI's 12-month forward price-to-earnings ratio (PER) currently stands at 5.4x, which is close to the baselines of past oversold zones.
Generally, a KOSPI PER of around 10x is evaluated as an average level, but it has now plummeted to 5.4x, which is an undervaluation level that can only be seen during extreme crisis phases such as the financial crisis or the pandemic, the analysis stated.
It added that the current stock prices already reflect beyond a slowdown in corporate earnings to the point of a catastrophe in the global economy.
In addition, based on MSCI standards, the South Korean stock market is the most undervalued among both developed and emerging markets, and the dollar-converted stock prices of Samsung Electronics and SK Hynix are virtually close to their lowest levels ever, raising the likelihood that they will support the market's downside, it projected.
Kiwoom Securities likewise analyzed that the recent sharp drop in the stock market was influenced more by shrinking investor sentiment than by deteriorating corporate earnings, noting that as stock prices fall, investors' psychology of searching only for bad news is further expanding the downward margin.
At the same time, it evaluated that the fundamentals of companies, such as their earnings, have not yet been severely damaged, and major technical indicators are all pointing to oversold signals.
However, while the brokerage sector noted that geopolitical uncertainties surrounding the U.S. and Iran and oil price volatility could persist for the time being, it forecasted that corporate earnings, rather than fear psychology, are highly likely to determine the future direction of the stock market.
Reported by Kim Minjeong | Video by Lee Yu-jin | Graphics by Yook Do-hyun | Produced by SBS Digital News
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