NH Macro Strategy
The author is an analyst of NH Investment & Securities. He can be reached at bk@nhqv.com -- Ed.
The Kospi has finally risen above the upper-end of its longstanding 2,200~2,500p range. The banking crisis originated in the US has proved to be a blessing in disguise. Governments and central banks in developed economies have acted swiftly to prevent the SVB collapse from evolving into systemic risk, and market expectations for the Fed ending its rate upcycle have heightened.
While the US long-term economic cycle is likely to enter a mild recession, expectations for a turnaround of soft data and corporate earnings are growing.
The relation between stock market and economy is like a man walking his dog: when the owner (economy) starts walking, the dog runs ahead in the same direction and then waits for the owner to catch up. An immediate V-shaped recovery will be difficult, but share prices have raced ahead amid confidence in the market bottom.
The domestic stock market has recently been adjusting, amid: 1) the start of the driving season in DMs; and 2) expectations that industrial activity will decline and leisure activity will increase in the summer. This year, expectations are running high towards reopening effects in regions other than the US. The divergence between goods and services will likely persist, and perspectives on the economy and the stock market should vary depending on which sectors or regions investors emphasize.
As a result, it will be difficult for the Fed to raise or lower the FF rate after May. But, expectations for a cut later in the year remain high. Thus, communications between policy makers and the market are more important than ever. We note that stock market adjustments provide buying opportunities. In line, it is worth paying attention to turnaround and high-quality stocks, especially semicon plays.
II. Investment strategy: Mixed
- The global economy will likely be characterized as mixed in 2023, amid contrasting hard and soft data from the US
- We recommend investors buy the Kospi below 2,400p. In the US, the long-term economic cycle is likely to enter a mild recession, but corporate earnings and soft data have just begun to improve. In 2023, the Kospi should level up in phases through frequent ups and downs.