Hello, everyone. It's already the second half of 2024. As we age, we feel the passage of time more. How was your investment performance in the first half of the year? How are you planning your investments for the second half? Whenever various economic indicators are announced, I deliver them to you in breaking news format. But today, let's take a comprehensive look at them. I will examine economic indicators comprehensively and present investment strategies for the second half. First of all, recently, Samsung Securities conducted a survey targeting wealthy individuals. They plan to increase stock investments in the second half and increase bond investments, aiming for a ratio of 60:40. However, I think a ratio of 70:30 would be better. As interest rates are expected to decrease in the future and our economy is partially recovering.

I'm scared. Yes, so I believe that our stock price, I mean, the KOSPI will reach the 3,000 era. Yes, for that to happen, our economy needs to recover. Liquidity needs to increase, yes. And the exchange rate needs to stabilize. So, considering these three economic variables, and I will present the investment strategy for the second half of the year more specifically. Also, in the last part, there is a Q&A. In fact, reflecting your demands, I asked for more specific questions in your comments, and I will answer your opinions more specifically. Recently, Samsung Securities targeted wealthy individuals, defined as customers with more than 500 million won in e-wallet assets, around 4,000 customers, asking how they plan to manage their assets in the second half of the year. However, overall, they answered that they would invest 60% in stocks and 40% in bonds. Specifically, regarding the investment rationale.

5% in overseas stocks, 35.9% in bonds, 99.9% in others, and 11.7% in Pro. That's what the response was. I will tell you later, but I will say that I think we need to increase our stock holdings more than what Samsung Securities' survey suggests. Specifically, let's examine things one by one. First, in our economy, we grew by 1.4% last year. However, this year, it is expected to recover to 2.5%. It is expected to recover from last year, mainly driven by exports, while domestic demand is relatively weak. This can be seen as a differentiated economic recovery. In any case, the economy is recovering. When we look at economic recovery, let me tell you that we should look at leading indicators. The leading index from Statistics Korea hit a low point last April and has been wavering recently, but it keeps rising. The increase in the leading index indicates an impending economic recovery. In fact, in the first quarter, our economic growth rate increased by 1.3% compared to the previous quarter.

If we look at the annualized basis, the U.S. economy grew by 5.2% in the first quarter, while in the first quarter, we had a very high growth. Of course, due to the high growth in the first quarter, it seems that the growth rate will slow down in the second and third quarters. However, the economy has recovered. Yes, but I mentioned that we should look at the OECD leading indicators earlier than the leading indicators announced by Statistics Korea. Yes, the OECD leading indicators are released about 20 days earlier than our Statistics Korea leading indicators, and then the OECD leading indicators lead our Statistics Korea leading indicators by about 2 months. In fact, if you just look at the leading indicators, I think it's okay to make asset allocations based on that. Oh, the leading indicators hit a peak in May 2021. At that time, our KOSPI was around 3,300, but the leading indicators

The KOSPI dropped, didn't it? Yes, however, our leading indicator, which hit a low point in February last year, has been steadily rising until June. Probably because our statistical office's leading indicators are lagging by about two months, based on this, we can see that at least until August, our statistical office's leading indicators would have also increased. In this way, we can see that some leading indicators are increasing, indicating an economic recovery. If the economy is growing, what is increasing for the economy to recover? Indeed, our export growth rate in the first half was significantly high at 99.1%. Yes, however, the leading news released by the OECD, which leads the statistics office's leading indicators by 2 to 3 months, indicates that at least until August or September, the high export growth trend could continue. It seems that we can see it this way. For specific items, semiconductor exports are doing well. Our semiconductor exports in 2018, for example.

There is a 20.9% Yes, but last year, it dropped significantly to 15.6%, but looking at the first half of this year, it has sharply increased to 19.2%, hasn't it? As semiconductor exports increase, our economy is recovering with the increase in exports. In addition, the proportion of shipbuilding is slightly increasing. Relatively, last year, automobile exports did very well. Even in the first half of this year, it recorded the highest amount historically, but the proportion is relatively decreasing. Personally, when adjusting the stock allocation by industry, I look at these export statistics. Looking at it by country, China really played a significant role in our exports from 2000 to 2018. Our exports did well to China. However, from 2019, the proportion of China has decreased significantly, and instead, the proportion of the United States has increased significantly. I judge the global trend by looking at our exports.

In the recent 4-5 years, China's economy hasn't been good, while the U.S. economy has been good. Especially in the first half of this year, the U.S. share was 19.2% and China's share was 19%. Pro - for the first time since 2002, the U.S. share has exceeded China's share. This indicates how well the U.S. economy has been. However, in the second half, Americans are currently unable to consume durable goods. As the growth in automobile exports to the U.S. slows down, in the second half, China's share is expected to increase slightly. Yes, the U.S. share is expected to shrink slightly. However, looking at our exports, there has been a steady increase in the medium term. ASEAN is growing, but India's share is still only 2.8%. It is steadily increasing. In the future, amid the U.S.-China power struggle, I believe that India will be the country that benefits the most. The Indian government is also actively responding to this, so the Indian economy is expected to grow in the future.

We expect our exports to steadily increase towards India and ASEAN. So, as exports increase, our economy is recovering. Next, the correlation coefficient between our KOSPI and exports is the highest, around 0.87. Every month, I ask you to adjust the proportion of stocks based on the decline of our KOSPI. In the short term, I am saying this. In April 2022, the KOSPI evaluated the average export amount by 40%. So, when the KOSPI was at around 3,200 to 3,300, I didn't understand. That means the KOSPI was evaluated by 40% of the average export amount. However, now that evaluation has been safely resolved. Currently, there is a KOSPI decline. It means domestic demand is not good because household debt is high.

The reason why the debt was high is not the current issue. It is a problem that occurred after the IMF bailout in 1997. The reason for the IMF bailout in 1997 is that from 1986 to 1988, our economy grew at an average annual rate of 12% due to the three regimes. Our economy was very good, so our companies, especially large ones, were optimistic about the future and invested a lot. However, in the 1990s, when demand was low, large companies became insolvent, and the financial companies that lent them money also became insolvent. In other words, the IMF bailout in 1997 was a process of dealing with insolvent companies and banks, injecting 169 trillion won into public works, and undergoing painful structural adjustments. Companies made a lot of profit as interest rates for structural adjustments fell. However, as they relatively reduced investments, companies borrowed less money from banks. So, companies borrowed less money from banks.

Because we borrowed less, our store had to use a lot of bank money. The bank had no choice but to increase loans to stores. So, before the foreign exchange crisis in 1997, 71% of the bank's loans went to companies and 29% went to stores. But because companies did not borrow much and the structure was distorted, our banks increased household loans. So, at one point, the proportion of store loans exceeded that of corporate loans. In this scenario, although it was store consumption, in the end, the stores went bankrupt. So, this chart shows the ratio of personal financial debt to assets in South Korea. Especially in 2001 and 2002, this ratio increased significantly. Since companies did not borrow money at that time, banks increased loans to stores. Also, the interest rate temporarily exceeded 20% around the foreign exchange crisis in 1997, but it dropped by 6 to 7% in 2001 and 2002. Interest rates decreased, and banks

Because we borrow, our household borrows from the bank at this time, spends, buys stocks, and buys real estate, so the insolvency of stores has worsened at this time. However, if we look at the first quarter of last year, what about this? Isn't the ratio of personal financial debt to assets decreasing significantly? What does this mean? Recently, it can be seen that financial debt is almost stagnant, while financial assets are increasing significantly. From this perspective, although it is true that our household has a lot of debt, with the increase in financial debt, some structural adjustments are being made. This is now a balance concept, and in terms of flow concept, individuals are surplus fund entities. Overall, if we look at financial companies as a whole, the money saved exceeds the borrowed money. However, what about the past four years? The surplus has been increasing significantly, especially in 2022.

During the year 2022, our store had 207 trillion more money saved in financial companies than the previous year, which decreased to 161 trillion. Nevertheless, overall, the amount of money individuals saved in financial companies is increasing more than the amount borrowed. Therefore, although there is a lot of debt, relatively, financial assets are increasing. Some time ago, a former secretary-general mentioned that if household debt bursts, there could be tens of times more external debt. I don't think it's to that extent. The store, of course, has discriminated, but the main point is that it's structurally improving. Simply put, even though the store has a lot of debt, what about it? Since we borrowed money from financial institutions, we have to pay interest every month and repay the principal at a certain point. As a result, the amount of money available for spending relatively decreases. So, from 2001 to 2002, household debt increased significantly, and since then...

Because we need to pay interest to the bank, our disposable income has relatively decreased. Yes, that's why our economy is shifting towards consumption-oriented and not in an extreme crisis. Therefore, with a high level of debt in our households, consumption cannot increase significantly. That's why, as mentioned earlier, our economic growth rate for this year is low. Despite the relatively weak domestic demand, exports are performing well, especially in semiconductors and ships. Even though the domestic market is sluggish, our economy is recovering through export-led growth. Our economy, represented by the KOSPI index, heavily relies on exports. As exports are increasing, the KOSPI index has risen and is expected to continue to rise. Next, regarding liquidity, I mentioned the evaluation of stock prices being overvalued or undervalued based on liquidity. One of the key indicators is M2 money supply. However, as of May 2021, the average in the past was...

There is a 58% but it is significantly higher than the 66% Pro average. In this case, we need to alert a bit of risk in the stock market. Yes, but by February 2023, it dropped to 50. The KOSPI market capitalization is undervalued compared to liquidity. It's assumed to be stagnant now. Also, it is expected to increase by an average of 2. However, liquidity has been increasing recently. In 2020, due to COVID-19, the Bank of Korea lowered the base interest rate by 0.5% and released a significant amount of money. However, as money was released in this way, prices rose. For example, in 2022, the consumer price index temporarily rose by 5.2% annually. The monetary policy goal of the Bank of Korea is financial stability and price stability. Since the price stability target is 2% and prices rose by 5%, the interest rate had to be raised to 3.5% to reduce the money supply significantly. Therefore, at one point, an indicator called M1

The indicator with very high liquidity consists of M1 cash, demand deposits, time deposits, savings deposits, etc. Funds that can move to wherever the yield is high at any time. However, this has decreased significantly but turned positive this year, and then the M2 growth rate also dropped to 2% at one point. As of April this year, it seems to be increasing by 5.7%. It means that the important liquidity of the market is increasing. Among the liquidity, short-term idle funds are increasing. For example, short-term idle funds refer to funds with very high liquidity, such as M1, MMF, and customer deposits. Of course, following the market, these short-term idle funds are also increasing a lot. Money has eyes and moves where the yield is high. This increase in short-term idle funds means that the expected return on stocks is high.

You can move to stock investment at any time. To put it simply, it can be seen that there is increasing money available for buying stocks. Currently, our main concern is when the Bank of Korea will cut interest rates, isn't it? However, based on Taylor's rule, I estimated the appropriate interest rate once. In the second quarter, it is at 3%, and in the second half, it will decrease to 2.6%. Yes, but when comparing my estimated appropriate interest rate with the actual Bank of Korea's estimate, the direction is almost the same. The appropriate interest rate level is continuously decreasing. Therefore, looking at these indicators, I predict that the Bank of Korea will cut interest rates as early as August or at the latest by October. That's how I see it. So far, the most concerning issue for the Bank of Korea has been the inflation rate. When the inflation rate reaches a certain level, for example, when the consumer price inflation reaches 2%, it is expected that interest rates will be cut. However,

Of course, the perceived inflation felt by our housewives is different from the consumer price index announced by our statistics office. For example, in June last year, our consumer price index headline rose by 2.4% compared to the previous year. Subsequently, the underlying inflation rate dropped significantly by 2.2%. This chart is a projection I made using a model I have until the end of the year on a monthly basis. However, starting from August, consumer prices are expected to drop to below 2%. Especially around October, it is expected to plummet to 1.5%, showing a significant decrease in inflation. With inflation decreasing like this, the Bank of Korea will have no choice but to lower interest rates. The market has already anticipated a rate cut by the Bank of Korea and continues to pressure for further rate cuts. One of the key indicators of market interest rates is the 3-year government bond yield. For example, the 3-year government bond yield from last December to June of this year.

The key interest rate continues to fall below the standard, which is unprecedented in our interest rate history. Therefore, the market interest rate has been lower than the Bank of Korea's existing interest rate. The market is predicting that inflation will fall in the future, and the economic growth rate will decrease. This is a sign as predicted by the director. Currently, as predicted, inflation is decreasing, and the economic growth rate for the second quarter will be announced at the end of July. Probably because the first quarter showed significant growth, our economic growth rate, the GDP growth rate, was 1.4% higher than the previous quarter, which, if calculated in the U.S. annual style, is 5.2%. While the U.S. economy grew by 1.4%, in the first quarter, we had very high growth. Probably, the growth rate in the second quarter will significantly slow down. Some predict that the second-quarter growth rate may even be negative. This is why the market interest rate has already dropped, anticipating a decrease in inflation.

It will be moderated around the economic growth rate. This is a sign of that. Inflation is decreasing, and when the economic growth rate decreases like this, it is inevitable to raise interest rates a bit. So, when the interest rate is lowered, of course, the market is somewhat optimistic and has risen. The stock market has risen. Also, as the interest rate falls, it is expected to increase by one step. Well, the U.S. needs to raise interest rates, so our interest rates can also work. Such forecasts are predominant. Most people are expecting that. However, yes, the U.S. may cut interest rates as early as September or at the latest in December. I believe they will cut rates in September. Recently, it seems that many U.S. economic indicators are showing signs of moderation, right? Especially looking at the U.S. economic indicators released last week, the U.S. economy is slowing down faster than expected. Consumer sentiment is deteriorating. Yes, historically, when stock prices rise, consumer sentiment does.

It was getting better, but consumer sentiment is actually worsening. This is because the savings rate in the U.S. is low, real median income is decreasing, and there is not much money to spend. For example, business sentiment is deteriorating rapidly. A typical indicator of business sentiment is the U.S. Institute for Supply Management (ISM) Manufacturing Index and Non-Manufacturing Index. For instance, the Manufacturing Index is at 48.5. Except for March, it has been consistently below 50 since November 2022. This indicates that the economy is in a recession. Despite this, the U.S. economy was doing well due to the strong performance of the service sector. However, in June, the Service ISM PMI Index fell to 48.8%, below the 50 baseline. This shows that even the service sector is slowing down. Additionally, initial jobless claims at the beginning of the year were 200,000.

As the number steadily increased in the past, recently, it has risen from 200,000 to 240,000. Yes, then the June employment trend was slightly higher than expected. However, the confirmation of the April and May employment growth rates caused a significant reduction. Isn't it going up by 4.1% in June? I expect it to rise to 4.5% within this year. Inflation is a bit exploding, but the Federal Reserve's monetary policy goal is maximum employment and price stability. It means that the employment growth momentum is slowing down. Although the inflation rate is slower than expected, it is slowing down. Therefore, the U.S. may raise interest rates starting from September. This is how it is viewed. Also, from the perspective of Taylor's rule, the estimated appropriate interest rate in the U.S. is decreasing significantly. So, it's only a matter of time before the U.S. and South Korea adjust their interest rates.

Han Yul needs to stabilize for our stock price to rise. However, I drew a long-term trend line for our Korean Wave, which is our KOSPI against the dollar exchange rate. If you look at it moving in the same direction, you can see that the exchange rate is drawn upside down. The exchange rate is the green line. If it falls below, it means the exchange rate has risen, indicating a decrease in the value of the Korean won. But if you look at it, how did our dollar exchange rate and KOSPI move almost in the same direction? In other words, when KOSPI rises, the Korean won falls, meaning the value of the won has increased. But recently, KOSPI has been steadily rising, albeit slower than the U.S. But the exchange rate has actually risen, indicating a decrease in the value of the Korean won. So, it shows a different appearance from the past. The problem is now our KOSPI

Are we reflecting the situation better in terms of the economy, or are we reflecting it better in terms of the exchange rate? You can think of two examples. We can consider whether our stock prices are better reflected or if the exchange rate is better reflected. However, I once did a statistical analysis. For example, the Sims test analyzes human relationships. But when I analyzed it, I found that the KOSPI explains the exchange rate more. So, when the KOSPI rises, the exchange rate also rises. It can be seen as falling when the exchange rate falls. Due to this misunderstanding, foreigners have been continuously buying. I have drawn up their cumulative net purchases, and currently, even if only foreigners enter the KOSPI market, they are buying nearly 24 trillion. So, they have been buying, the stock prices have risen, and in the past, they moved almost in the same way.

How was the first half of 2002 in terms of the military industry? How was the Integrated Ant Movement at that time? Foreigners were selling, but individuals were buying a lot, which caused our stock prices to rise significantly. In this way, there could be a different appearance between domestic net buying and stock prices by sector. However, overall, the correlation between domestic net buying and the KOSPI index is very high at 0. So, recently, foreign net buying has continued, and the KOSPI has been rising. However, in the past, when domestic net buying increased, the exchange rate fell or rose, as in the case of the won. But now, even though foreigners are buying a lot, our current account surplus is expected to be around 70 billion dollars this year. Despite this, the exchange rate is showing a different trend from the past. Also, there may be North Korean risks included in the exchange rate.

The North Korean risk is currently progressing seriously, and the United States is planning to impose a lot of tariffs on China. China's response is to lower interest rates or something like that. Is it not somewhat reflected in the exchange rate? Some think that way. The explanation focused more on the KOSPI decline and the exchange rate. The rise in the KOSPI implies that the Korean won will also rise, meaning the exchange rate will fall. This is one way to look at it.

회복세 보이는 코스피, 현명한 투자전략 [김영익의 경제스쿨]

안녕하세요, 김영익입니다. 
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많은 관심과 사랑 부탁드립니다. 
감사합니다. 

[약력] 
전남대학교 경제학 학사
서강대학교 경제학 석사 
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前)한국은행 통화정책자문위원
前)LX하우시스 사외이사
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前)대신증권 리서치센터장

[비즈니스 문의]
- 강연요청: https://bit.ly/US_강연요청
- 출연요청: https://bit.ly/US_출연요청
- 기타 비즈니스 협업: solchan08@us-all.co.kr

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회복세 보이는 코스피, 현명한 투자전략 [김영익의 경제스쿨]

회복세 보이는 코스피, 현명한 투자전략 [김영익의 경제스쿨]

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