[Edaily Reporter Shin Ha-yeon ] A forecast has emerged that the domestic stock market will experience high volatility in the first half of next year due to doubts about the profitability of artificial intelligence (AI) investments and the burden of high interest rates, followed by a gradual recovery. As the earnings growth seen this year—centered on the semiconductor sector—spreads to other industries, investment options are expected to broaden. However, the extent to which companies can sustain their elevated profit levels has been identified as the key variable for a stock market rebound.

According to the report “2027 Financial Market Outlook: From Expectation to Proof,” published on the 28th by KIWOOM Securities’ Research Center, the projected range for the KOSPI next year is 5,100 to 8,100 points. These figures are based on a 12-month forward price-to-book ratio (PBR) of 1.0 to 1.6 times.

KIWOOM Securities forecast that the stock market will experience increased volatility in the first half of next year before laying the groundwork for a recovery starting in the second quarter. The firm believes that a technical rebound following October’s sharp decline and the easing of concerns in the AI sector driven by third-quarter earnings reports will support a recovery in stock prices through the end of this year. However, analysts note that in the first quarter of next year, concerns over the burden of rising U.S. long-term interest rates, deteriorating cash flow due to expanded AI investments, and a slowdown in semiconductor profit growth may resurface.

Han Ji-young, an analyst at KIWOOM Securities, stated in a report, “2027 will be a time to diversify sector selection,” forecasting that investment opportunities will expand across various sectors showing confirmed profit improvement, moving away from this year’s market dominated by a handful of sectors.

She predicted that the turning point for a rebound would come after the second quarter. The assessment is that confidence in the sustainability of domestic companies’ earnings could recover as volatility in international oil prices and interest rates subsides and the free cash flow (FCF) of major U.S. tech companies passes its trough. She explained that whether expanded AI investment leads to actual improvements in profitability will be the key factor determining the recovery of stock market valuations.

One analyst noted, “We believe the market is currently evaluating earnings sustainability more rigorously than the absolute size of earnings.” This implies that while corporate profits have surged due to the semiconductor boom, investors are cautiously assessing whether this profitability can be sustained over the long term.

The lower end of the projected KOSPI range—5,100 points—assumes a scenario where confidence in corporate earnings deteriorates further. While the KOSPI’s current 12-month forward return on equity (ROE) stands at 32.6%, significantly exceeding the 10-year average of 10.2%, analysts note that this level is difficult to sustain over the long term, as it reflects the sharp surge in profits driven by the semiconductor super-boom.

Conversely, the upper limit of 8,100 points reflects a scenario in which ROE normalizes to 14%—still higher than the historical average—and the price-to-book ratio (PBR) recovers to 1.6x through expanded shareholder returns and improved capital efficiency. The assessment is that even if the growth rate of semiconductor profits slows, the overall undervaluation of the stock market could be alleviated if improved profitability in non-semiconductor sectors supports the market.

The core of next year’s sector strategy is diversified investment, moving away from a concentration on semiconductor-led blue-chip stocks. KIWOOM Securities expects that, following this year’s sharp improvement in corporate earnings centered on semiconductors, growth rates will normalize next year. Projecting annual operating profit growth rates of 35% for the KOSPI and 43% for the KOSDAQ, the firm suggested that investment opportunities may expand in small- and mid-cap stocks as well as on the KOSDAQ.

One analyst emphasized that “the core of the 2027 sector strategy lies in the diversification of profit growth and market leadership rather than a complete overhaul of existing leading stocks.” The analyst noted that even if semiconductors continue to make a significant contribution to profits, the sectors driving stock price gains could become more diverse as upward revisions to profit forecasts spread to non-semiconductor sectors.

The firm identified semiconductors, IT hardware, machinery, banks, and holding companies as promising sectors for the year. It viewed the profit growth potential in semiconductors, IT hardware, and machinery—driven by expanding AI investment—positively, while it viewed the improvement in corporate value for banks and holding companies—driven by increased shareholder returns—favorably.

In the short term, the analysis noted that construction, shipbuilding, biotech, and automotive sectors also warrant attention. In particular, the report noted that improved earnings outlooks in construction and shipbuilding are coinciding with an inflow of foreign capital, while biotech and automotive sectors are seen as having potential for a rebound given that they were relatively neglected or experienced sharp declines this year.

One analyst explained, “At this point, sectors such as construction, energy, and shipbuilding should be prioritized,” adding, “As stability in earnings outlook and improvements in foreign capital flows become evident, it would be appropriate to expand investment targets to include IT hardware and semiconductors.”

Macroeconomic conditions are also expected to support the recovery of the domestic stock market. KIWOOM Securities projected South Korea’s economic growth rate for next year at 3.1%. While strong semiconductor exports and expanded investment in AI infrastructure will drive growth, the firm forecast that the pace of growth in the second half of the year will be more moderate than in the first half due to a high base effect and a slowdown in the growth of investment.

Interest rates and exchange rates are also key variables. The firm projected that the Bank of Korea will implement additional benchmark interest rate hikes through the first quarter of next year before shifting to a hold stance, after which market interest rates are expected to decline gradually. While the won-dollar exchange rate may temporarily dip below 1,300 won early in the year due to dollar sales by semiconductor exporters, it is expected to rebound modestly in the second half as demand for dollars from overseas investment continues.