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| Strategy analyst Seo Sang-young at Kiwoom Securities / Courtesy of Kiwoom Securities |
Large-cap companies and blue-chip stocks least affected by market correction periods
By Anna J. Park
Seo Sang-young is one of the most active stock analysts for retail investors, frequently appearing in various types of media, including financial news, YouTube broadcasts, podcasts and research papers. He has been leading Kiwoom Securities' strategy analysis team at its research center for the past few years.
During a recent interview with The Korea Times, the veteran analyst warned that the stock markets in Korea would face a correction period during the second half of this year, followed by a period of a few years when the stock index will be trapped in boxed band ranges. His rather grim outlook over the next few years is based on an expected declining global trade volume during the period.
"A declining export volume in an export-driven economy means a decrease of corporate profits, which in turn would be reflected in abated stock indices," the analyst said, adding that the third and fourth quarter of this year, as well as the next few years, will not see a dynamic growth in the global economy.
"The fact that global trade volume is declining is the worst case scenario for companies which earn through exports," he added.
He cited a similar case happened in early 2010s, when the global trade volume recorded a temporary year-on-year surge from the base effect ― distortion in an inflation figure resulting from abnormally high or low levels recorded in previous periods ― right after the global financial crisis at the end of 2000s. However, when the base effect was over, the global trade volume as well as Korea's export volume remained stagnant from 2011 to 2014, growing at a much slower pace from the past, and the nation's KOSPI index was also trapped in a boxed band from 1,700 to 2,100 points during the period.
"I see a similar pattern will repeat this time around. Emerging markets as well as the global economy would fall in the trap of low growth as the power of liquidity hits its limit, contracting the global trade volume for the next coming years. Korean companies' corporate profits from the decreased exports will be shown as the KOSPI index would be locked up in the boxed band range again," he explained.
Despite the rather bleak outlook, the analyst expected large-cap companies and Korea's representative blue-chip stocks would be least affected by the correction period. He said IT-based tech companies will be growing strong in the current 'contactless' business trends, as well as other growth-generating sectors like biopharmas and secondary batteries.
"There's a limit in the power of liquidity, and it will hit the wall during the second half of this year. Yet these blue-chip companies will stay strong no matter what, and would be least damaged by market correction periods," he said.
Seo also stressed investors pay attention to the government's policy changes regarding inter-Korean relations. He also said investors need to closely follow major international events, such as U.S. presidential election and changes in U.S-North Korea relations, to see specific industry sectors expected to be temporarily benefitted from those events.
The analyst also advised retail investors to watch stock markets in the U.S. and China, as Korea is extremely susceptible to changes in global economy.
"We need to closely follow global stock markets, as Korea is an export-driven economy. The first hour of the nation's stock market after it's opening in the morning is largely affected by the U.S. stock markets over night. After 10 a.m., we can see that the market is also heavily affected by changes in the Chinese futures or stock markets," he said.
In order to keep track of these moves, he has been leading a grueling schedule over the past decade; he usually arrives at the company at around 2:30 a.m., and watch overseas stock market. The rest of his day is filled with seminars, broadcasts, research and more.
"An analyst needs to have three things: physical strength, diligence and a strong level of curiosity. Without them, one cannot make a good stock analyst," he said.
"Our job is to find out reasons why markets move in a certain way. Personally I find it so much fun, and that's why I can endure physical hardships."
