Cash-rich Kakao, Celltrion, LG Household stocks safe bet during volatility: analysts

Cash-rich and liquidity-reliable Korean companies are deemed safe investment bet amid rising uncertainties from the forecast of a global recession coupled with high inflation, according to local brokerages.

According to financial information provider FnGuide on Monday, upgrade by local brokerages in earnings outlook for the second quarter and full year involved just three sectors in the main Kospi – chemical, retail, and food and beverages.

Brokerages raised second quarter operating income outlook for steel, metal, and electric and electronics sectors but lowered their 2022 forecast. Electric and electronics sector that includes blue chip stocks like semiconductor stocks saw the biggest slash of 3.73 percent in the annual outlook.

The revision in earnings outlook comes as companies face increased cost burden due to high inflation and interest rates.

“If income fall stops at 10 to 20 percent, the Kospi slide could range from 2,300 to 2,050,” said

Huh Jae-hwan, a researcher at Eugene Investment & Securities Co.

“Easing in oil prices could be the inflection point for Korean stocks to turn north,” said Roh Dong-gil, a researcher at Shinhan Investment as he predicted Kospi bottom at around 2,000 given the exchange rate and cut in earnings estimate.

During bearish and volatile climate, analysts advise bet in companies with strong cash flow, pointing to Samsung Electronics, Kakao, Celltrion, POSCO Holdings, LG Household & Health Care, NCSoft, Korean Air Lines, Kumho Petrochemical, Orion, Hankook Tire & Technology, Pan Ocean, and Doosan Bobcat.

Earnings of global companies are also expected to have influence on local stock market.

Market focus will be on earnings outlook for local chip stocks after U.S. Micron Technology announces its earnings on June 30, said Han Ji-young, a researcher at Kiwoom Securities.

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