"Only Ants Lost Again" Why Foreigners Did Good on the Worst Report Card of the 2024 KOSPI

■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: December 31, 2024 (Tuesday)
■ Dialogue: Lee Ji-hwan, CEO of i Asset

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.

◆ Reporter Cho Tae-hyun (hereinafter referred to as Cho Tae-hyun): Yesterday was the last trading day of the domestic stock market. This is the last trading day of the year. But my report card wasn't very good. The overall report card for this year is not good. Let's look at the overall flow and forecast of the stock market. We have Lee Ji-hwan, CEO of Ai Asset, the brain of the vivid economy. Welcome, CEO.

◇ Lee Jihwan, CEO of Ai Asset (hereinafter referred to as Lee Jihwan): Hello.

◆ Cho Tae-hyun: I'm spending the last day of 2024 with you in such a meaningful way. Yesterday was the closing day of the domestic stock market, and the market is not open today, right?

◇ Lee Ji-hwan: Yes, we are closed today.

◆ Cho Tae-hyun: The 2nd will be held from 10 a.m. I think you usually rested more at the beginning of the year, but didn't you?

◇ I usually took a day off. We only took one day off on January 1st and closed on the 31st, and the US stock market opens normally. So we usually take two days off on the 31st and January 1st.

◆ Cho Tae-hyun: I'm in a situation where my grades are not good, but I have more days off. The KOSPI was expected to rebound for the first time in four days, but it ended up falling yesterday. Even the 2400 line collapsed, how did you see the situation yesterday?

◇ Lee Ji-hwan: There was still quite a lot of foreign buying on the KOSDAQ yesterday. I think short covering (short selling redemption) went in for now, and KOSDAQ rose quite significantly yesterday by more than 1.8%. On the other hand, the KOSPI ended lower as foreigners continued to sell, and the market continued to end lower on a monthly basis as the market closed lower yesterday, making it difficult this year, and it was very difficult to supply and demand, and there was no change in momentum, and it ended in a difficult situation.

◆ Cho Tae-hyun: What I paid attention to yesterday was yesterday's closing price KOSPI 2455.91 This part. Why did this attract attention?

◇ Lee Ji-hwan: If you form yesterday's closing price, you will get a monthly salary. If we look at it on a monthly basis, on a daily basis, on a weekly basis, and on a monthly basis, it will fall for six consecutive months yesterday.

◆ Cho Tae-hyun: If you don't get this, it's been 6 months in a row?

◇ Yes, so it's not that common for us to fall for six consecutive months during the IMF or during the financial crisis.

◆ Cho Tae-hyun: I don't remember. by star

◇ Lee Ji-hwan: Usually, if you fall for about 3 months, there is a rebound, but in this year's case, it's only been 6 months since the entire second half of the year, but our investors must be very hurt, and the disappointment is now bound to continue to grow because they fell without showing any hope until the end. It looks like this.

◆ Cho Tae-hyun: Looking at the overall report card this year, I think the report card is really disastrous, and I think the report card was very different by supply and demand when looking at investors who invested in Korea. Of course, foreigners would be better than individuals, how was it?

◇ Lee Ji-hwan: I think the stocks that individuals bought fell a lot and the stocks that foreigners bought did a little good, but this year it got a little worse. It intensified, and if you look at the decline in stocks that individuals bought, minus 30, 40, and 50 fell so much that it was a basic decline in representative stocks. In general, Samsung Electronics also fell more than 30% this year, and Samsung SDI. Especially this year, individuals probably suffered a lot from secondary batteries, but Samsung SDI and LG Chem all fell nearly 50%. So, it fell by about half, and I also did a lot of betting related to KOSDAQ and KOSPI in that the index might rebound. ETF-related stocks also fell by more than minus 40%, so overall, most of the top stocks bought by individuals fell by 40% to 50%, and these stocks are representative stocks in the KOSPI in a way. If you go into the KOSDAQ, the decline will increase in a way. Since representative stocks also fell this much, KOSDAQ stocks, for example, minus 70% and 80% of secondary battery-related stocks are almost common. It's hard to mention.

◆ Cho Tae-hyun: That's right, there was a trend in the KOSDAQ where there were a lot of secondary battery materials companies that fell out. How was the foreigners' report card?

◇ Lee Ji-hwan: But the biggest irony is that foreigners did a good job to some extent, but the problem is that there was no foreign buying itself. In the past, foreigners bought low prices if the fall was excessive in some of the large stocks related to the index, and especially this year, we lost so much of the index that some arbitrage transactions could come in at the end of the year.

◆ Cho Tae-hyun: I don't think I'll lose money if I buy it now.

◇ Lee Ji-hwan: Nevertheless, in the past, there was usually a 'grouse and egg' strategy aimed at both stock price gains and dividend gains, but this year, that trend did not come out at all. Perhaps they think this situation is not a situation where they can simply come in to receive dividends, and since we have made major political and institutional changes, foreigners are now taking a step back on the overall Korean stock market itself rather than short-term profits. So it was a little surprising that there was no dividend-related movement this time. I also worked for a foreign securities company for about 7 years, but from my point of view, I thought that I would definitely come in to receive dividends this time. However, the fact that there was no such trend itself seems to be an order from the headquarters not to approach from the United States or the United Kingdom =.

◆ Cho Tae-hyun: Don't just watch the Korean stock market?

◇ Lee Ji-hwan: I think that's probably the time for this policy to be approached.

◆ Cho Tae-hyun: So you're saying that political uncertainty has had an impact on those things, right?

◇ Lee Ji-hwan: I think it's a big influence.

◆ Cho Tae-hyun: Okay. In this way, individuals were a very supportive force for the domestic stock market. But these days, it's called 'escape from the soup', so I think this flow continues. Does it actually come out as an indicator?

◇ Lee Ji-hwan: Since the difference in returns between Donghak ants and Seohak ants, which we often talk about now, it has become common for individuals to find a way out of the U.S. stock market anyway, and now the funds themselves have been concentrated on the U.S. stock market since former President Trump was elected in November. So, not only Korea, but also the global stock market funds were almost concentrated in almost one place in the United States in November, so it's probably the same for Korean individual investors, and if we don't step into the U.S. stock market now, we have a very strong insurance character.

◆ Cho Tae-hyun: Is it kind of like FOMO? I'm the only one left out?

◇ Lee Ji-hwan: That's right. I think it should be considered that way, but rather, there seems to be a lot of concern about the fact that the focus on the U.S. stock market will be strengthened after President Trump takes power next year. As a result, the trend of concentration is accelerating to the extent that global stock markets cannot be discussed except for the US stock market.

◆ Cho Tae-hyun: It's not just about us. I see. Let's talk a little more about what the New York stock market will look like later. Even in this situation, there must have been some stocks with returns this year, right? What kind of events did you stand out about?

◇ Lee Ji-hwan: First of all, AI-related momentum stocks have shown some support even though semiconductors have been broken, and the stock price has risen significantly, especially from AI momentum to power devices. Stocks such as Hyundai Electric, Hyosung Heavy Industries, and LS Electric did well to some extent despite the difficulties.

◆ Cho Tae-hyun: Is it related to wire or data center?

◇ Lee Ji-hwan: That's right. And now the demand for electricity is growing very much, and it is said that the demand for electricity is almost doubling not only this year but also by 2028. In particular, power demand related to AI-related servers is 2 gigawatts next year, but by 2028, it will increase more than eight times to 16 gigawatts. As a result, the stock price rose a lot in that it will continue to boom for a long time in terms of electricity. Also, unexpectedly, the stock price increase was very large in food-related areas such as Samyang Foods. So, the biggest stocks that have seen their stock prices rise a little in the midst of a difficult stock market are performance. In this period of performance, when interest rates were originally raised, then frozen, and then interest rate cuts, the performance market always unfolded. In the case of this year, so many big things are happening now that this performance market has become a little meaningless, but in the case of the United States, the performance market continues now. So, the stock prices of well-performing stocks are quite high now. You can look at it like this.

◆ Cho Tae-hyun: Well, the core of stock prices is always performance after all, so it's bound to happen. If so, the performance will continue to be strong like this when looking at next year. So, what kind of industries do you think the stock price will be good?

◇ Lee Ji-hwan: First of all, the direction of the U.S. stock market is becoming somewhat clear. So, when former President Trump was elected, we saw it from a dichotomous perspective related to expectations and damage, and in a way, it was expectations and concerns, but this came into reality. In terms of performance, in the end, AI momentum is the most important main pillar in the United States, and the other is the economic consumer goods, including Tesla, and AI momentum and economic consumer goods are almost two-top, leading the stock market now. So in a way, the United States is going very ideally right now. So it's very good that the core momentum is related to the economy and AI, but in Korea, this momentum itself is not formed by the leading sector, so it should be linked to the U.S. stock market, but in recent cases, it is not linked to the U.S. stock market.

◆ Cho Tae-hyun: That's right. Even if we go well, we fall down.

◇ Lee Ji-hwan: So in the past, when Nvidia rose, SK Hynix should at least raise it, but Nvidia is trying to get at the bottom and start a little upward, but Hynix can't do that yet. So, if this linkage rate is also down now, the decoupling with the global stock market is expanding now, it will be a very difficult momentum, but I think this will probably be the peak of this decoupling at the end of the year and early January next year.

◆ Cho Tae-hyun: Nevertheless, what kind of business do you pay attention to next year?

◇ Lee Ji-hwan: Next year, we have to look at the AI momentum-related side as well. If you look at the Korean stock market, you can see two things. One is that it's good like semiconductors and power devices related to AI momentum, but it's good, and the other is that they have some expectations to turn around here. For example, there has been a long-term drop in clothing and food, but it's better to look at it in a dichotomy between turnaround and AI, which can improve performance.

◆ Cho Tae-hyun: Okay. Since you keep talking about New York, I'll take a look at New York before talking about the exchange rate. At the end of the year, the Santa rally in the U.S. is missing and then undergoing a little adjustment. Then it would be okay to go in now. Or there will be some adjustments next year. What do you think?

◇ Lee Ji-hwan: I think that if President Trump takes power on January 12th next year, adjustments will come before or after that, or at least once. So, there will be profit-taking at least once, but it's coming out in advance at the end of the year. However, it is a little hard to say that the U.S. stock market will decline given the demand for standby funds now. And stocks that are currently receiving AI momentum are still in good shape. So if you look at it that way, the US stock market can approach it from a buying perspective when adjusting, but it's a little compressed. So, the sector itself will be compressed, and the U.S., as I mentioned earlier, is likely to see hardware software, on-device AI, and economic consumer goods, represented by Tesla, rise on both sides. However, even within stocks that receive AI momentum now, the stock price is a little differentiated if you look at it now. If you look at it, it is somewhat differentiated between those who can go based on performance and those who can go based on performance, so in the case of Nvidia, which can go based on performance, next-generation products such as Blackwell and Rubin continue to pour out, so it can be viewed positively in this way. However, stocks that have risen with Tesla-related momentum may undergo some adjustments at the end of the year and the beginning of the year.

◆ Cho Tae-hyun: I really don't know about Tesla. The stock price seems to be going too high compared to the performance, so we need to be careful. Even if there is an adjustment, there is a high possibility that the overall strength will continue. I think the exchange rate is one of the factors that is holding back the index in the domestic market again. Because the exchange rate is so high, foreigners who are concerned about foreign exchange losses are leaving. The exchange rate went up a lot, right?

◇ Lee Ji-hwan: The current level is almost the same as we were during the financial crisis or the IMF. So, if it exceeds the mid-1400 won range, it is the same as a crisis situation, but the problem is that the exchange rate and the top will be somewhat limited. For example, even if it approaches 1,500 won, it can be temporarily over once or twice, but I don't think it will be maintained. Because the U.S. is not raising interest rates now anyway. However, in terms of the value of the counter currency, the dollar index moves almost solidly around 108 now. Then, the top will be limited in terms of what goes over to some extent, but for example, it will not be easy for Korea's exchange rate to fall below 1400 won.

◆ Cho Tae-hyun: For the time being, the high exchange rate continues?

◇ Lee Ji-hwan: Yes, then if we say that the exchange rate is maintained in this state, the victim or beneficiary stocks that are related to the exchange rate that we often talk about are not as sensitive as they were in the past, but if this continues, we need to pay attention to it. For example, in the case of Hyundai Motor, operating profit increases by 380 billion won when the exchange rate rises by about 10 won. So, on the contrary to beneficiary stocks in this area, there is a borrowing cost of introducing aircraft like airline stocks, which can be very fatal, so it's a situation that can affect the stock market in terms of exchange rates.

◆ Cho Tae-hyun: If we have to focus on the exchange rate as well, do we have any room for the exchange rate to come down when we see that political uncertainty can be settled in some form?

◇ But that's a little limited because the dollar index itself should be relatively soft against the other currency, but if you look at it now, the euro or yen can't go as strong as you think. So, I thought the yen would be a little tougher on raising interest rates, but it retreated more than I thought, and the euro is now stronger than the U.S. to cut interest rates.

◆ Cho Tae-hyun: The economy is worse there than ours.

◇ So it's not easy for the dollar to weaken, and the other thing is that the absolute interest rate itself is too high in the United States. As a result, the dollar's weakness is bound to be limited to some extent.

◆ Cho Tae-hyun: Okay. You just told me about the aviation industry, but a major disaster occurred the day before yesterday, so I think the investment sentiment in aviation and travel will be very bad. What do you think?

◇ Lee Ji-hwan: First of all, in the case of aviation, I really want to cry, but it's like getting slapped. So, in the current case, the exchange rate is high, so most aircraft are foreign currency debt that borrows in dollars. In addition to the increased interest burden on this, especially oil prices, which have to be bought in dollars, the burden on oil prices is increasing, and in the end, the burden on the strengthening dollar is increasing. There are some views that the industry itself will shrink due to this real accident, and I don't think this risk will end up in a short period of time. Overall, there may be some reorganization of the entire LCC industry, so it seems that there will be some reorganization of the entire industry rather than ending in an accident at once.

◆ Cho Tae-hyun: Well, I'm in a situation where I'm suddenly a little scared to go on a trip.

◇ Lee Ji-hwan: That's right. You don't want to ride the LCC.

◆ Cho Tae-hyun: I know. I think that's inevitable. In fact, reservation cancellation continues. I'll wrap this up now. Overall, it is highly likely that Korea's market will not be so good next year. Until the beginning, you said this. In terms of profitability, the Korean stock market is likely to be better than the US stock market. What do you think about this?

◇ I think it would be better to look at the time like this. So, it's true that the Korean stock market is not good right now, but with the fundamentals and political aspects, the price right now has fallen so much that it's ridiculous in a way. So if you look at it that way, the Korean stock market expects next year to be difficult, but if you look at the stock price alone, there is a possibility that the stock price will bottom out and rise. If the ban is lifted in March next year, the supply and demand of foreigners could change a little from February. On the other hand, in the case of the U.S. stock market, the first and second quarters could be very strong after President Trump took office. On the other hand, our stock market could be a little strong heading into the second half of the year. Then, while the U.S. stock market is currently on a high march, related stocks seek returns of about 30 to 40%, while Korean stocks can double or triple. So, I hope you can see this difference in returns a little more positively next year.

◆ Cho Tae-hyun: Well, since it's so cheap right now, I think we can expect a little more profitability in that regard. Next year, I hope we can see them flying up and crossing the 3,000 mark once again, but I don't think it's going to be easy. I see. So far, I will finish with Lee Ji-hwan, CEO of I-Aset, and Lee Jae-hwan's shy smile. Thank you for talking today.

◇ Thank you.

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