Global stock market shaken by deglobalization… Pay attention to the first place and value

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At the ‘2022 Hankyung Stock Investment Lecture’ held at COEX in Samseong-dong, Seoul on the 16th, attendees listen to a lecture on ‘Korea stock market outlook for the second half of 2022’, head of Shinyoung Securities Research Center Kim Hak-gyun. By Kim Beom-jun

The stock market has been experiencing a harsh winter this year. Investor sentiment was severely weakened by the combination of excessively high inflation after the COVID-19 crisis and the central bank’s interest rate hikes to catch it. The prolonged Ukraine-Russian war and China’s corona blockade also overlapped with bad news.

Stock market experts gathered at the ‘2022 Hankyung Equity Investment Lecture’ held on the 16th, agreed that it is necessary to devise an investment strategy in preparation for the change in the global economic system. This is because the era of ‘de-globalization’, an era of political and economic confrontation, is coming from the era of ‘globalization’, in which companies traveled the world in search of economic efficiency. Experts advised that in order to withstand the period of change, we should adopt a strategy of investing mainly in value stocks and No. 1 stocks.

In the era of post-globalization, inflation continues

Kim Hak-gyun, head of Shinyoung Securities’ research center, said in a lecture on the same day, “In the future, it will be an era where we have to live with inflation.” Center director Kim explained that the phase of ‘disinflation’, in which the inflation rate continues to decrease, is over. As the wind of deglobalization blows, production costs rise, which inevitably leads to a phase of inflation. After peaking at 15.68% in 1981, the US long-term interest rate (10-year Treasury note), which has been on a downward trend for 40 years, is also turning to an upward trend.

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Center Director Kim said, “In the era of globalization, the behavior of companies seeking efficiency while building factories in China and other places was one of the causes of disinflation. is being done,” he said. “The problem is that even if central banks in each country raise interest rates, they cannot keep up with inflation, and only the economy can stagnate,” he said.

In such a situation, the analysis of Center Director Kim is that the stock market will not receive adequate power. He said, “The correction intensity of the US and Korean stock markets is similar to that of the bear market in the second half of 2018,” he said. He added, “It will be decided whether further adjustments will be made in the future depending on the choice of the US central bank (Fed).”

Hyo-sun Jang, head of the global equity team at Samsung Securities, also explained that de-globalization is shaking the global stock market. According to Samsung Securities, the average frequency of mentioning deglobalization in earnings announcements by global companies has risen from 10 times before 2020 to more than 60 times this year. Exports’ share of global gross domestic product (GDP) also fell from 61% in 2008 to 52% in 2020.

Graphics = Reporter Kim Seon-woo

Graphics = Reporter Kim Seon-woo

“Russia is in control of raw materials and China is in control of manufacturing,” said Jang. “If the Fed expects to raise the key interest rate to 3.2% to 3.4% by the end of the year to keep up with inflation, we will have to endure the pain that comes with it,” he said.

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Look for opportunities in No. 1 stocks and value stocks

Rather than leaving the stock market because of a bear market, experts have called for a change in investment strategy. Although the international stock market has been weak this year, with the US S&P 500 falling by more than 23%, it is expected that the economic slowdown will occur slowly as companies are performing well compared to the decline in stock prices.

Team leader Jang advised to put ‘No. 1 growth stocks’ with excellent performance first in a supply shortage situation. These companies include Tesla, Microsoft, Nvidia, and Apple. He also advises looking at dividend stocks such as McDonald’s and United Group that can defend their portfolios.

Team leader Jang said, “In the electric vehicle field, Tesla has surpassed other automakers, and its delivery volume and operating profit are increasing unparalleled. .

Center Director Kim ordered that growth stocks with excessively high valuations (the share price level relative to earnings) be removed from the basket. Instead, he said, we should focus on bonds and value stocks, which have become more attractive as investments due to high interest rates.

“In the case of IBM and McDonald’s, which recorded 40-50 times their price-earnings ratio in the 1960s, their stock prices stagnated for 10 years after the stock market peaked,” he said. “After the dot-com bubble burst in 2001, the As the index outperformed the tech-focused Nasdaq, we see opportunities in the traditional industrial sector.”

By Bae Tae-woong, staff reporter btu104@hankyung.com

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