Analysts Divided on KOSPI's Outlook after Downturn | Be Korea-savvy

Analysts Divided on KOSPI’s Outlook after Downturn

(image: Korea Exchange)

(image: Korea Exchange)

SEOUL, Aug. 11 (Korea Bizwire)South Korean analysts are divided over how much the local stock market will drop down the road following a recent downturn sparked by foreign selling and other negatives.

Some fear the key price index may sink below the psychologically important 2,300-point level on foreign investors’ massive profit-taking, the so-called North Korea risk and other unfavorable factors. Others, however, paint an optimistic picture, predicting it could regain ground after a short period of correction.

The key index went south for the third straight session on Thursday as offshore investors continued to take profits from recent gains.

KOSPI closed 0.38 percent down at 2,359.47 on Thursday, but it fell to 2,339.06 at one point, hovering below the 2,340-point level for the first time in more than two months.

It was also down a whopping 4.65 percent from July 25, when the key index reached an all-time high of 2,453.17.

Foreigners’ appetite for profit-taking was stoked further by North Korea’s threat to fire four missiles near the U.S. Pacific territory of Guam, which made the South Korean currency weaker against the greenback.

Foreign investors have been cashing in gains in tech stocks since July following a recent bull run of the local stock market. Offshore investors sold a net 2.7 trillion won (US$2.36 billion) between July 24 and Thursday.

“Starting late July, foreigners began profit-taking that focused on information and technology stocks,” said Kim Young-jun, a senior researcher at Kyobo Securities Co. “The stock market has also been hit by such negatives as North Korea’s nuclear risk and the won’s fall.”

With foreigners continuing their net selling, concerns are rising that KOSPI’s support level may drop further amid escalating geopolitical risks stemming from North Korea’s nuclear and missile programs.

Most brokerage houses have estimated the lower ends of their KOSPI bands at 2,340-2,360.

“Excluding a war variable, KOSPI’s support level will be in the low 2,300-point range, but it could be broken should worries about a possible war on the Korean Peninsular deepen,” Cape Investment & Securities analyst Kim Yu-gyeom said.

Lee Kyung-min, a senior analyst at Daeshin Investment & Securities Co., echoed Kim’s view.

“We predicted KOSPI’s July support level to be 2,300, but there is a possibility that it will fall below the mark in a couple of months,” he said.

Some analysts, however, are optimistic, saying KOSPI will continue its uptrend despite a series of negative factors, including North Korea’s nuclear risk.

“It is inevitable for the local stock market to undergo a correction period following a rally stretching seven to eight months,” said Lee Chang-mok, a senior analyst at NH Investment & Securities Co. “KOSPI is not expected to fall below the 2,300-point mark.”


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