Stocks to stay stuck in 2022 after a weak 2021, analysts say

The Kospi rose a paltry 1.1 percent in 2021, and analysts are pessimistic about 2022 as the pandemic lingers and rate threats loom.

The consensus of six analysts is that this year the Kospi is likely to be boxed in in a range between 2,800 and 3,300. Only two of the six analysts project the index to break all-time record set in July last year, at 3,305.

Last year most analysts correctly anticipated that the index would break 3,000 and hit a new record.

"The net profits of Korean companies this year are projected to total between 170 and 180 trillion won," said Lee Kyung-soo, head of the Meritz Securities Research Center. "Even with a price-to-earnings ratio between 11 to 12 times, the most that the Kospi would reach would be 3,450."

The advice for this year is to invest conservatively rather than aggressively.

Hwang Seung-taek, head of the Hana Financial Investment Research Center, projected the Kospi to move between 2,890 and 3,480. Yoon Ji-ho, head of research at eBest Investment & Securities, forecasts a ceiling of 3,150, the lowest high of the six.

"Usually in a time when the economy is not expanding, the upper limit of the Kospi is 1.1 times of the ordinary price-earnings ratio," Yoon said.

Shinyoung Securities gave a range of 2,700 to 3,300 and IBK Securities 2,800 to 3,200.

U.S. Federal Reserve tapering and a possible increase in rates are the biggest factors contributing to volatility of stocks. While tightening is expected by all analysts, the speed of the tightening is the big question.

"The U.S. Fed could suddenly increase interest rates if inflation is worse than expected," said Kim Hak-gyun, head of research at Shinyoung Securities. "If the speed is faster than expected, it could weigh significantly on the markets."

During its meeting last month, the Fed said it would end asset buying started in March 2020 in March this year, three months ahead of the previous schedule.

"If Covid-19 again spreads with the Winter Olympics in Beijing early this year, the impact on the global economy will be inevitable," said Chung Yong-taek, head of the research center at IBK Securities.

The analyst added that there are also political factors that may affect the stock market, including the presidential election in March, the local government election in June and the midterm elections in the U.S. in November.

"In a time when liquidity circulation is slowing, company performance must be adjusted," said Seo Cheol-soo, head at Mirae Asset Daewoo Research.

The analysts said investors should hold shares through any downturns and not sell into the volatility.

Four out of the six proposed semiconductor stocks as the best investments for the year.

Kim Hak-gyun of Shinyoung Securities recommended dividend stocks.

"Holding companies are undervalued and as such even the smallest change would be favorable," Kim said.

There is also growing interest in game companies and content developers, especially with the metaverse and NFT booms.

"Content, games and software are promising areas that are consumed without any conflicts between countries," said Lee Kyung-soo, head of Meritz Securities Research Center.

LEE TAE-YUN, KIM YEON-JOO [lee.hojeong@joongang.co.kr]