[Weekend Money] "KOSPI Still Undervalued Despite Middle East-Driven Volatility"

Negotiation Noise Between the U.S. and Iran Persists
KOSPI Forward PER Falls to Low-7 Range, Below 2008 Levels
Semiconductors, Automobiles, and Shipbuilding Remain Key Sectors to Watch

Although some difficulties are inevitable in the process of easing Middle East-related risks, there is a growing outlook that an aggressive overweight strategy for the KOSPI remains valid.

On the 9th, the domestic stock market index was displayed on the electronic board at the Hana Bank dealing room in Jung-gu, Seoul. Photo by Jinhyung Kang

According to Daishin Securities on April 11, the physical clashes in the Middle East have entered a turning point with the two-week ceasefire agreement. As negotiations between the United States and Iran are in full swing, the direction toward ending the conflict remains unchanged; however, the ups and downs of the global stock market will likely depend on how these negotiations unfold.

The key issue is whether supply chains through the Strait of Hormuz can be normalized. Even after the temporary ceasefire, passage through the Strait of Hormuz remains uncertain due to conflicting interests between Israel and surrounding countries. The conditions for peace talks, as asserted by the U.S. and Iran, are also at odds. Depending on the outcome of negotiations, there is a possibility that Iran's influence over the strait, such as imposing passage fees, may increase, making continued disturbances unavoidable. However, considering the real economic impact on the U.S., the upcoming U.S.-China summit, and U.S. President Donald Trump's negotiation style, some analysts believe the conflict could end before next month.

Macro indicators and variables related to monetary policy have also been cited as major factors that will influence the market. Increases in energy prices and logistics costs are expected to be reflected in the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) for March. On the monetary policy front, the confirmation hearing for Kevin Warsh, the nominee for the next Federal Reserve chair, is expected to pose an event risk. In the market, expectations for a dovish stance supporting rate cuts coexist with concerns over a hawkish stance favoring quantitative tightening.

Daishin Securities pointed to the earnings visibility of domestic companies as a factor offsetting the uncertainty in global markets. As the earnings season approaches, the 12-month forward earnings per share (EPS) for the KOSPI has been revised upward to 811.5 points, yet the gap between earnings and share prices has widened due to geopolitical uncertainty. Based on the 5,800-point level for the KOSPI, the 12-month forward price-to-earnings ratio (PER) stands at just 7.12 times, even lower than the post-2008 financial crisis trough of 7.4-7.6 times, placing it in a 'deep value' range.

Daishin Securities researchers Jung Haechang and Lee Kyungmin stated, "Even when factoring in future economic and inflation uncertainties, an aggressive overweight strategy remains valid at the current early 7-times forward PER level for the KOSPI," adding, "We recommend maintaining an overweight stance on export stocks such as semiconductors, automobiles, and shipbuilding, as well as on growth and overlooked stocks in sectors like secondary batteries, internet, pharmaceuticals, and biotechnology."

This content was produced with the assistance of AI translation services.