The KOSPI's average daily trading volume has fallen to its lowest level this year, dampening investor sentiment. Analysts suggest that the domestic stock market has entered a rare undervaluation phase since the global financial crisis. If corporate profit forecasts remain largely intact, current stock prices may present a buying opportunity.
According to the Korea Exchange, the average daily trading volume for July was 483.3 million shares, the lowest recorded this year. Monthly average trading volumes decreased from 550.1 million shares in January to 1.048 billion in February, 1.107 billion in March, and 947.2 million in April, before dropping to 698.7 million in May and 490.0 million in June. This month, the average daily trading value also fell to 41.6 trillion won, significantly below the 50 trillion won mark seen in May and June, indicating a rapid decline in investor sentiment.
As trading volumes decrease, market attention is turning to the KOSPI's 12-month forward price-to-earnings ratio (12MF PER). This key market valuation indicator reflects the expected earnings of KOSPI-listed companies over the next 12 months. A lower ratio typically indicates that the market is undervalued.
Shinhan Investment Corp. recently reported that the KOSPI's 12MF PER has dipped below 6.7 times, nearing a record low of 6.65 times. Historical instances of the KOSPI's 12MF PER falling below 7 times have been rare, occurring only in 2002 (5.50 times), 2003 (5.36 times), 2004 (5.47 times), and during the 2008 global financial crisis (6.27 times).
Similarly, Korea Investment & Securities shared a comparable perspective. Analyst Kim Dae-jun noted, "The KOSPI's 12MF PER at 7430 points is 6.43 times, which is 2.7 standard deviations below the recent 10-year average." According to Kim, there have only been six trading days since the 2008 global financial crisis when the closing 12MF PER fell below 7 times, with the lowest closing at 6.27 times on October 24, 2008, and an intraday low of 6.07 times on October 27 of the same year.
Market analysts believe that if corporate profit forecasts are not significantly downgraded, the current KOSPI levels may present a buying opportunity. Senior analyst Kang Jin-hyuk from Shinhan Investment Corp. stated, "Assuming the end of the AI cycle or no downward revisions to profit estimates, the KOSPI's valuation is at its lowest since the financial crisis, making bargain buying a viable option." Kim Dae-jun also remarked, "While short-term investor sentiment is subdued, there is a high likelihood of recovery in the semiconductor sector if the index rebounds."
* This article has been translated by AI.
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