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As the US Treasury yield surged amid concerns over inflation, the Korean stock market fell sharply following the US stock market.
As the share prices of LG Electronics, Samsung SDI, and SK Innovation in the secondary battery division, which are known as’national stocks’ and the’next-generation flagship industry’, are falling all at once, individual investors are also feeling anxiety. However, according to the analysis of the opinions of the heads of research centers at major securities companies in Korea, the Maeil Economic Daily reported that it is necessary to pay attention to the business cycle stocks in preparation for after the mediation.
On the 26th, Oh Hyun-seok, head of the Samsung Securities Research Center, diagnosed that the tendency to avoid investing in stocks, a risky asset, was remarkable as the interest rate of 10-year Treasury bonds in the U.S. rose due to the recent struggle of the KOSPI in the Korean securities market. However, Center Director Oh diagnosed, “The rise in US 10-year Treasury yields is a result of the inflation base effect being highlighted as the economic recovery and expectations for recovery overlap at the same time, but this is a typical phenomenon that appears in the early stages of economic recovery.”
Center Director Oh believes that the interest rate level that will have a significant impact on the stock market in the short term is 1.5-1.7% for the US and 2-2.1% for Korea based on 10-year government bonds. According to the US Treasury Department on the 25th (local time), 10-year Treasury bonds soared to 1.61% during the day and closed at 1.54%. According to the Financial Investment Association on the 26th, the last 10-year Korean Treasury Bond price rate on this day rose by 7.6bp (1bp=0.01%) from the previous day to 1.96%, the highest since March 2019.
However, Center Director Oh said, “The market will be on the rise overall, but for now, investment preferences will shift to economic sensitive stocks over economic defense stocks, value stocks over growth stocks, and contact (face-to-face)-related stocks rather than uncontact (non-face-to-face). It should be used as an opportunity,” he advised.
Yoon Chang-yong, head of Shinhan Financial Investment Research Center, diagnosed that in addition to the fact that the high inflation expectations for the rise in US Treasury yields served as a variable, there was also a temporary supply-demand imbalance caused by the increase in Treasury supply. Yoon said, “After mid-March when the size of the US government’s additional stimulus measures are determined, the volatility will also change according to the movement of fine-tuning monetary policy, such as the change in the size of the Fed’s long-term bond purchases.”
The Korean stock market is expected to continue to fluctuate until the first quarter of this year (January to March). Yoon predicted, “After March this year, volatility will ease, and in the second quarter (April-June), the earnings market will be driven by the economic recovery.”
The industries that should be noted from the perspective of investors are semiconductors, banks, and chemicals and steel. “The semiconductor industry will turn around in the third quarter, and banking stocks can expect interest income to recover from rising interest rates,” said Yoon, “the internet and game divisions have a big valuation burden.”
Meanwhile, Seok-won Choi, head of SK Securities Research Center, said, “If corporate profits continue to rise in the second half of this year and next year, stock prices above 3200 are not unexplainable. Looking at the economic situation, even if the current interest rate rises, interest rates at the normal level of the past 3-4% It is difficult to go up to the section where you can see ” Center chief Choi diagnosed, “Based on the growth rate and corporate performance, interest rates below 2% based on 10-year US bonds will not be a significant risk factor for the stock market.”
Meanwhile, Jung Yong-taek, head of IBK Investment & Securities Research Division, advised, “Even if interest rates rise, we still need to pay attention to growth stocks with high cash reserves such as FAANG (Facebook, Amazon, Apple, Netflix, Google).”
[김인오 기자 / 신유경 기자]
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