* I met with Mr. Kwangsoo Lee, the director, at 12 pm today and wrote this article following his advice. To withstand extreme volatility and a crash, I organized my thoughts. As this is from the perspective of a 6-year individual investor, there may be inaccuracies. Diverse opinions are welcome.
Causes of the Crash and Current Situation
This crash was caused more by adjustments to future earnings expectations and supply-demand shocks than by poor performance itself. Although investor deposits are around 100 trillion won, it is estimated that they have already been used for low-price purchases, weakening the margin. Therefore, it is judged that it will be difficult to lift the index with the power of individual investors for the time being.
Recovery Scenario
Assuming there are no further adverse events, I believe that everything that can come out has already come out. The index is more likely to follow a U-shaped flow with sideways movement rather than a V-shaped rebound. It seems that the bottom will be established until the third quarter earnings are confirmed, and a boring box range will continue. After the uncertainty surrounding earnings is resolved and foreign investment returns, it is expected to take 6 months to 1 year and 6 months to recover to the previous high. This is an estimated figure based on the recovery period of similar crash cycles, but unfortunately, I have not prepared accurate statistical evidence.
November US Midterm Elections and Earnings Confirmation
The US midterm elections are a noteworthy event for gauging the timing of a rebound. Historically, policy uncertainty before elections has often led to a wait-and-see attitude among global funds, suppressing the index's upper end. However, after the elections, when uncertainty is resolved, there have been many cases of strong relief rallies. Assuming this will be similar this time, it is expected that sideways movement will continue until August or October, and then foreign capital will flow in and stock prices will gradually recover as earnings for companies like Nvidia are confirmed and next year's capex expansion becomes visible towards the end of the year.
Urgent Need for Policy Response to Reduce Volatility
Although the causal relationship is unclear, Kospi volatility has significantly increased since the launch of single-stock leverage products. Extreme volatility has continued while authorities have been inactive, severely depressing investor sentiment. If volatility reduction does not occur soon and continues, the time it takes for stock prices to recover will be considerably longer, regardless of macro conditions and earnings.
Actions to Take as an Investor
Unfortunately, it seems difficult to expect a responsible response from the government at this time. Rather than harboring vague expectations, it is necessary to be patient and wait, considering that it will likely take two to three times longer than usual. It's a situation where we have no choice but to endure even if opportunity costs are regrettable. I hope that there will be no significant damage to the long-term fundamentals of the semiconductor industry, and I plan to wait at least until the end of the year, and possibly until the second or third quarter of next year. Of course, if adverse events such as US interest rate hikes and CapEx reductions occur, the response strategy will change.
Thank you for reading.
