[Edaily Reporter Park Sun-Yeop ] Analysts have noted that as earnings estimates for the KOSPI are being rapidly revised upward, expectations for the index’s upper limit are also rising. However, given that earnings momentum in the semiconductor sector—led by SamsungElectronics(005930)and SK hynix(000660)—remains overwhelming, experts believe it will be difficult for a rotation in buying sentiment to spread across the broader market.
Lee Jae-man, an analyst at Hana Securities, stated in the “July Stock Market Outlook and Strategy” report published on the 29th, “The current 2027 KOSPI net profit estimate stands at 946 trillion won. Applying the average price-to-earnings ratio (PER) of 9.9 times since 2010, the expected upper limit for the KOSPI could rise to 11,450 points.” Previously, on the 1st, Hana Securities had projected an upper limit of 10,450 points based on a 2027 KOSPI net profit estimate of 890 trillion won.
Regarding the index’s lower bound, the firm suggested the 7,900 level based on the recent 20-day deviation. The analyst explained, “In early June, when concerns over a Fed interest rate hike were prominent, the KOSPI’s 20-day deviation low was 94%,” adding, “Applying this to the current KOSPI, the lower bound is around 7,900 points.” He also pointed out that while it took an average of 32 trading days in the past for the index to recover to the level just before a circuit breaker was triggered, the recovery period has shortened significantly this year to 5–6 trading days.

Rising earnings expectations and the impact of exchange-traded fund (ETF) supply and demand were cited as the reasons behind the recent increase in market volatility. According to Hana Securities, the VKOSPI reached 90 points in June, climbing to a level higher than its peak during the global financial crisis. While expectations rose as the KOSPI’s 12-month projected operating profit growth rate surged to 239% year-over-year, concerns that actual earnings might fall short of forecasts or that profit growth could have peaked also contributed to increased volatility.
The influence of ETFs has also grown. The number of domestic equity-related ETFs rose from 536 in January of last year to 615 by the end of May this year. In particular, as ETFs tracking specific industries or sectors have increased rapidly, the impact of rebalancing on the supply and demand of individual stocks has also expanded. Leveraged ETFs alone totaled 43 in May, an increase of 14 from the previous month. The cumulative trading value of the single-stock leveraged ETF for SK hynix reached 116 trillion won, 1.6 times that of the SamsungElectronics leveraged ETF.
The concentration in the semiconductor sector remains a key market variable. Hana Securities analyzed that SamsungElectronics and SK hynix account for 41% and 31%, respectively, of the KOSPI’s 12-month projected net profit, with the two stocks combined reaching 72%. In contrast, their combined market capitalization share stands at around 55%. Noting that SK hynix’s market capitalization surpassed that of SamsungElectronics on the 22nd, reaching 2,080 trillion won, the analyst stated, “The fact that the market capitalization share reversed before the profit share reversal is an extreme sign of concentration and one of the signals of short-term overheating.”
The problem is that, from a profit perspective, there is still no clear sector to replace semiconductors. Hana Securities projected that this year’s KOSPI net profit will reach 729 trillion won, a 235% increase year-over-year, and will rise by 30% to 946 trillion won next year. Within this, SamsungElectronics’ net profit growth rate for this year is expected to be 570%, while SK hynix’s is projected at 410%. They are also projected to grow by 33% and 38%, respectively, next year, outperforming the market average. In contrast, the net profit growth rates for KOSPI companies excluding these two stocks are relatively low at 64% this year and 18% next year.
The analyst explained the limitations of the domestic market by comparing it to examples of rotation trading in the U.S. stock market. This year, on the S&P 500, the remaining stocks outperformed the so-called “Magnificent 7.” This is because the gap in profit growth rates between the M7 and non-M7 stocks has narrowed significantly. However, the analysis suggests that rotation trading based on earnings may be limited in the domestic market, as SamsungElectronics and SK hynix still hold a strong profit advantage.
Nevertheless, falling oil prices could present opportunities for certain sectors. As negotiations for a ceasefire between the U.S. and Iran progress, the price of West Texas Intermediate (WTI) crude oil has dropped to around $70 per barrel. Hana Securities identified U.S. banking and software, as well as domestic pharmaceuticals, biotechnology, hardware, and software, as sectors that historically saw improvements in operating profit margins and relatively high stock returns when WTI was at the $70 level. The explanation is that these sectors, which have underperformed this year, have room for a rebound.
However, the burden of high interest rates remains. The yield on the 10-year U.S. Treasury note stands at around 4.4%, higher than the 3.9% recorded before the outbreak of war between the U.S. and Iran. The analyst emphasized, “The key variable to watch alongside the decline in international oil prices is U.S. market interest rates,” adding, “In an environment where high interest rates persist, careful stock selection is crucial.”
He identified the following criteria to watch in a high-interest-rate environment: △companies with a free cash flow growth rate higher than their net income growth rate; △companies with high net income growth rates in the second and third quarters that can be classified as growth stocks; and △companies expected to show a steady increase in operating profit margins from the first through the third quarters. Among domestic stocks, he identified SamsungElectronics, SK hynix, HYOSUNG HEAVY INDUSTRIES(298040), LG Innotek(011070), HYUNDAI ROTEM(064350), KOREA AEROSPACE INDUSTRIES(047810), DaeduckElectronics(353200), and HanmiPharm(128940) as meeting these criteria.
The analyst stated, “The condition for a rotation is a narrowing gap in earnings growth rates,” adding, “Since the domestic stock market still has strong earnings momentum in the semiconductor sector, we need to look not just at oversold conditions but also at whether earnings, cash flow, and profitability are improving.”