Korean Stock Market Faces Volatility Ahead of Chuseok Holiday

NH Investment & Securities has forecasted a KOSPI range of 6400-7500 for this week (21-23 September), as market risk aversion intensifies ahead of the Chuseok holiday. Macro-economic factors and uncertainty surrounding the upcoming US-China summit are expected to weigh on markets.

However, analysts suggest that if stock prices decline, it could present an opportunity to increase equity exposure. This is due to still-positive corporate earnings outlooks and relatively cheap valuations following market corrections.

NH Investment & Securities analyst Na Jung-hwan cited potential upward factors including easing US-Iran geopolitical risks and falling oil prices, while downward pressures include possible U.S. regulatory easing on Chinese semiconductors. The upcoming meeting between U.S. President Donald Trump and Chinese President Xi Jinping on 24 September (local time) is being closely watched.

Macroeconomic uncertainty remains high. Daeshin Securities analyst Lee Kyung-min noted that markets have fluctuated between stress from a hawkish Federal Reserve stance following the recent FOMC meeting and hopes for policy easing, with heightened short-term volatility expected ahead of the holiday.

The U.S. Federal Reserve raised interest rates by 0.25 percentage points to 3.75-4% at its September 16 meeting, with Fed Chair Kevin Warsh signaling potential further tightening amid inflation concerns. Japan's central bank also raised rates by 0.25 percentage points to 1.25%, marking the highest level since 1995.

Lee Kyung-min advised that if markets correct this week, it could be an opportunity to increase stock holdings ahead of the holiday period, noting historical trends where KOSPI typically gains after holidays following pre-holiday declines. Recent data shows average KOSPI returns before and after Chuseok for the past 10 years were -0.42% and +0.68%, respectively.

Valuation metrics also suggest cheapness, with NH Investment & Securities analyst Na Jung-hwan noting that the KOSPI's forward 12-month P/E ratio stands at 5.5x, the lowest in history, based on consensus earnings estimates of 806.3 trillion won for this year and 1,047.5 trillion won for next year.