"KOSPI to Hit 12,600"... Top 10 Preferred Stocks in the Bullish Second Half [Weekend Money]

Outlook and Strategy Report for the Korean Stock Market in the Second Half

KOSPI Expected Range Set at 8,400 to 12,600

Semiconductor Rally to Continue; Financial and Domestic Sectors in Focus

Samsung Securities has projected that the strong performance in the domestic stock market will continue into the second half of the year, setting the annual upper target for the KOSPI at 12,600. The firm anticipates that semiconductors will drive earnings growth, and that the rally will expand to include the financial and domestic sectors in the fourth quarter. For its top picks, Samsung Securities selected ten stocks, including Samsung Electronics and SK hynix.

According to Samsung Securities' "Outlook and Strategy for the Korean Stock Market in the Second Half of the Year" report released on July 4, the forecasted range for the KOSPI in the second half is between 8,400 and 12,600.

Yang Ilwoo, team leader at the Samsung Securities Research Center, explained, "We have raised our assumption for sustainable return on equity (ROE) from 16.3% to 17% and applied a price-to-book ratio (PBR) of 3 times, presenting 12,600 as the annual upper target." The 12-month forward ROE for the KOSPI is currently around 23.3%, and it is expected to exceed 24% in the third quarter.

On the other hand, the firm presented 8,400 as the lower bound. This represents a 12-month forward price-to-earnings ratio (PER) of 8 times, and is based on the fact that over the past 20 years, except for this year, the KOSPI has not remained below a PER of 8 for more than three consecutive weeks on a weekly basis. However, if market volatility increases, Samsung Securities also left open the possibility that the index could temporarily adjust to around 8,000.

By sector, semiconductors are expected to continue driving earnings momentum in the second half. Operating profits of KOSPI200 companies for 2027 are estimated to increase by about 31% year-on-year. Of the estimated increase of approximately 283 trillion won, about 246 trillion won, or 87%, is expected to be concentrated in the semiconductor sector.

The firm also sees a high likelihood that earnings forecasts for the semiconductor sector in the second half will be further revised upward. Currently, the operating profit consensus for semiconductor companies is considered achievable even if semiconductor prices do not rise significantly in the second half. Yang stated, "This means that the current consensus is not burdensome."

Additionally, with Korea's nominal gross domestic product (GDP) likely to post double-digit growth over the next 12 months, there is room for further upward revisions in earnings forecasts not only for the banking and securities sectors, but also for domestic demand sectors.

Yang commented, "We remain bullish on the Korean stock market in the second half," adding, "Until the third quarter, sectors related to the semiconductor and artificial intelligence (AI) value chains are expected to maintain strong performance, and in the fourth quarter, this positive trend could spread to domestic demand sectors as well."

Key market variables cited include: ▲whether inflation in the United States stabilizes ▲the possibility of further upward revisions to corporate earnings forecasts ▲and normalization of valuations. First, due to the fading impact of tariffs and stable oil prices, the U.S. Consumer Price Index (CPI) is likely to rise at a slower pace, which would limit the burden of Federal Reserve monetary policy on the stock market. Even if the base rate is raised once in the short term, as long as long-term inflation expectations remain stable, the upward momentum of the domestic stock market is not expected to be disrupted.

Regarding the valuation debate, Yang explained, "The reason global stock market valuations are not rising is likely because investors are removing valuation premiums from big tech and software companies, while not closing the discount gap for semiconductor companies." He added, "As profit stability improves for semiconductor firms, their valuations are likely to improve as well," and further noted, "A lot of debate could, in fact, present opportunities."

The firm presented the following as its most preferred stocks for the second half of the year: Samsung Electronics, SK hynix, Samsung Electro-Mechanics, Doosan Enerbility, Hyosung Heavy Industries, SK Telecom, APR, Korea Financial Holdings, SAMSUNG E&A, and Shinsegae. These comprise three IT stocks, three industrials, two consumer discretionary, one financial, and one communications stock. The highest target price is for Hyosung Heavy Industries at 4.3 million won, followed by SK hynix at 3.5 million won, Samsung Electro-Mechanics at 1 million won, Shinsegae at 565,000 won, APR at 510,000 won, and Samsung Electronics at 500,000 won.

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