Stock Market Rallies on Hopes for War's End and Ahead of Earnings Season

South Korea's stock market saw an upward trend, fueled by easing expectations for the Middle East conflict that has lasted for over a month and the approaching earnings announcement season. Investors focused on two major variables: the international political situation and corporate performance. This week, the KOSPI closed at 6191.92, up 333.05 points (5.68%) from the previous week, while the KOSDAQ rose 76.41 points (6.99%) to 1170.04. Expectations for peace negotiations between the United States and Iran led to a concurrent rise in global stock markets.

Institutional investors were net buyers, purchasing 1.2777 trillion won worth of stocks, while individual and foreign investors were net sellers, offloading 2.5961 trillion won and 473.9 billion won respectively, engaging in profit-taking. Sectors leading the gains included IT hardware (13.5%), displays (11.0%), and cosmetics, apparel, and toys (8.7%).

Lee Sang-jun, a researcher at NH Investment & Securities, analyzed that continued contact between the U.S. and Iran has confirmed the possibility of a second round of negotiations, and the impact of Middle East geopolitical risks on stock prices is gradually becoming limited. Anticipation for the earnings season, which will officially kick off with SK Hynix's earnings report on the 23rd, also served as a catalyst, raising the expected band for the KOSPI to between 5700 and 6400 points. Lee Sang-jun further commented that based on Samsung Electronics' strong earnings, SK Hynix is also likely to record a surprise.

Amid an upward revision of KOSPI earnings forecasts, the 12-month forward price-to-earnings ratio (PER) has fallen to 8.2 times, indicating a phase where valuation and earnings are rising in tandem. From an investment strategy perspective, an approach centered on the semiconductor sector, driven by the expansion of artificial intelligence (AI) infrastructure, proved effective. The proliferation of AI agents has led to a surge in token usage, highlighting issues of insufficient computing power, such as rising graphics processing unit (GPU) prices and service disruptions. Beyond semiconductors, sectors such as power equipment, holding companies, defense, chemicals, and export-oriented consumer goods were identified as key areas of interest.

Lee Kyung-min, a researcher at Daishin Securities, assessed that based on a PER of 8 times, the current KOSPI is equivalent to the 6600 level and remains in an undervalued territory. Although there is a widening gap between stock prices and earnings due to geopolitical uncertainty, he believes that short-term volatility could present opportunities to increase holdings, as the direction of earnings improvement is maintained. A response strategy centered on export and growth stocks was deemed effective.