The South Korean benchmark Kospi is unlikely to revisit its record high this year, according to Park Se-ik, executive director at Chesley Investment Advisory. While the index has rebounded from a recent sharp decline, raised interest rates are expected to keep equities under pressure for the remainder of 2024.
Interest rates remain the biggest hurdle
Park told Maeil Business TV that the Kospi is unlikely to surpass its previous peak within the next six months. The primary obstacle, he said, is the current level of interest rates.
“The stock market is highly sensitive to interest rates,” Park said. “With rates remaining raised after recent hikes, they will continue to limit gains in the broader market.”
He added that the yield on the 10-year U.S. Treasury note, now hovering in the mid-4% range, would need to drop below 4.4% before the market could stage a sustained rally. Until then, the Kospi is more likely to trade within a prolonged range rather than break new highs.
Volatility could spike ahead of the Chuseok holiday, Park warned, citing tighter liquidity and uncertainty over U.S. Federal Reserve policy. Still, he suggested such dips should be seen as buying opportunities rather than signs of deeper trouble.
Selective optimism for large and small caps
Despite the cautious outlook for the broader market, Park expressed confidence in specific segments. Samsung Electronics, the country’s largest company by market capitalization, is expected to lead a rebound in the coming weeks.
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“Samsung Electronics is likely to rebound strongly two to three weeks before announcing its preliminary third-quarter earnings in October,” he said. The tech giant’s performance often sets the tone for the broader market, and its recovery could provide a much-needed lift.
Park was also bullish on small- and mid-cap stocks, which have lagged behind their larger counterparts. Many of these companies, he argued, have undergone excessive corrections, making their valuations attractive.
“I see more than 100 quality companies that could rise more than 100% over the next year,” he said. The gap between large and small caps has widened in recent months, but that divergence may create opportunities for investors willing to look beyond the index heavyweights.
The Kospi’s trajectory will depend heavily on external factors, particularly U.S. monetary policy. If Treasury yields retreat as Park suggested, the market could find firmer footing. For now, though, the path back to record highs appears blocked by the same forces that have weighed on equities all year.
Investors, meanwhile, are left to handle a market where the biggest gains may not come from the usual suspects. The question isn’t just whether the index can recover, but which parts of it will lead the way.
