Kospi Volatility Rises Ahead of Chuseok Holiday

NH Investment & Securities projects the Kospi will trade between 6,400 and 7,500 this week. The index closed at 6,894.23 on September 18, a gain of 2.66%. Analysts expect increased volatility ahead of the Chuseok holiday. Risk-off sentiment is likely to strengthen in the coming sessions.

Market participants view potential pullbacks as opportunities to add equity exposure. Earnings expectations for South Korean listed companies remain solid. Valuations are currently at inexpensive levels. The Kospi 12-month forward price-to-earnings ratio stands at 5.5, a record low.

Macro Factors Drive Market Caution

Uncertainty surrounds the upcoming summit between U.S. and Chinese leaders. The meeting is scheduled for September 24 in Washington. Looser U.S. semiconductor restrictions for China could negatively impact Samsung Electronics and SK Hynix. Geopolitical risks between the U.S. and Iran have eased, supporting broader market sentiment.

The Federal Reserve raised its benchmark rate by 0.25 percentage points to 3.75% to 4.0%. Fed Chair Kevin Warsh indicated potential for further tightening. The Bank of Japan also raised its rate to 1.25% on September 18. This move places Japan’s policy rate at its highest level since 1995.

Historical Trends Favor Post-Holiday Recovery

Trading demand typically turns conservative before long holidays. Sidelined funds often flow back into the market afterward. Over the past 10 years, the Kospi averaged a return of minus 0.42% in the five days before Chuseok. The average return in the five days after the holiday was plus 0.68%.

Analysts advise using market corrections to increase stock exposure. This strategy anticipates a post-holiday rebound. The upward trend in net profit consensus remains intact. Combined consensus net profit for this year stands at 806.3 trillion won.

Valuations Remain Attractively Cheap

The consensus for next year’s net profit is 1,047.5 trillion won. Upward revisions have slowed but the broader trend continues. The current valuation level offers a margin of safety. Investors are monitoring the impact of global monetary policy shifts. The market awaits clarity on the U.S.-China tech trade dynamics.