Shinhan Financial Group's Future Strategy Research Institute has identified easing profit volatility and establishing a long-term investment culture as key tasks to solidify the era of the KOSPI surpassing 6000 points. While the government's Value-Up policy raised the market's bottom by around 1000 points, continuous upward momentum requires structural improvements such as reducing reliance on semiconductors and adopting a platform-based profit model.
According to the Institute's report titled 'Conditions for Structural Transformation of the Korean Stock Market,' released on the 10th, the KOSPI broke the historic 6000-point mark earlier this year. However, recent fluctuations saw a 19.9% drop from 6307 points on February 26 to 5052 points on March 31 due to the aftermath of the US-Iran conflict, which amplified volatility.
The recent market rally was attributed to the government's Value-Up policy and the AI semiconductor boom. The Value-Up program is estimated to have raised the Price-to-Book Ratio (PBR) by 0.2 times, resulting in an increase of about 1000 points in the index.
However, the profit structure heavily focused on IT and semiconductors (around 40%) and the average individual investor holding period of just 9 days are still seen as obstacles in the market.
To improve the market's structure, the Institute proposed the platformization of the manufacturing industry. By transitioning to subscription-based services linked to maintenance and operational data after product sales, profit volatility can be reduced.
Furthermore, the report emphasized the need to reorganize non-core businesses centered around general products like petrochemicals and steel, reallocating capital to growth areas such as secondary battery materials.
On the supply side, urging the establishment of a long-term investment base through the inflow of retirement pension funds is recommended. It is believed that market volatility can be alleviated with pension fund inflows at the levels seen in the US (40%) and Australia (20%).
As for next-generation growth drivers, the Institute suggested areas such as bio new drug development including Contract Research Organizations (CRO) and Digital Health (CDO), expanding into advanced fields of defense industries like space and unmanned drones, and implementing hydrogen reduction ironmaking technology (HyREX).
In order for the effects of the Value-Up policy to continue, the Institute advised the establishment of a system where the market can assess whether shareholder returns are being implemented. Financial institutions and authorities should also promote a healthy investment culture through education and institutional support to encourage long-term investments.