SEOUL, Aug. 24 (Korea Bizwire) — Despite a recent market seesaw, foreign investment banks have painted a rosy outlook of the South Korean stock market amid signs of improving economic conditions and ample liquidity, sources said Monday.
Global investment bank Credit Suisse recently upgraded its outlook for the Korea Composite Stock Price Index (KOSPI) to 2,600 from an earlier estimate of 2,300.
“Investors are likely to take heart from improving short-term economic indicators on the back of the U.S. dollar’s continued weakness that gives a boost to the KOSPI,” senior Credit Suisse researcher Park Ji-hoon said.
In particular, South Korea’s exports, a key growth engine of Asia’s fourth-largest economy, have been on the mend as major economies ease COVID-19 lockdowns, he added.
Government data show South Korea’s exports have been shrinking at a slower pace in recent months.
The country’s outbound shipments fell 7 percent on-year to US$42.8 billion in July, a slowdown from the 10.9 percent drop in June and the 23.7 percent tumble in May. In the first 20 days of August, exports contracted 7 percent from a year ago.
Park also said the South Korean stock market could get a further boost from better-than-expected performances by global tech behemoth Samsung Electronics Co. and other companies.
Samsung posted a 23.5 percent jump in its second-quarter operating income, buoyed by brisk demand for memory chips from data centers amid the coronavirus pandemic.
In its latest forecast, Macquarie Securities raised its yearly KOSPI target to 2,400 from an earlier 2,200, citing an increase in market liquidity and a boom in individual investing.
The investment bank had earlier downgraded its KOSPI forecast to 2,200 from 2,400, citing the fallout from the coronavirus crisis.
“We remain guarded about the impact of the coronavirus pandemic on South Korea’s macroeconomic structure but have revised up the KOSPI target due to rising liquidity and increased participation by retail investors,” Macquarie Securities said.
In a report released last month, HSBC raised its investment rating on the South Korean market to “overweight” from “neutral,” saying it may benefit from a recovery in exports amid eased lockdowns and aggressive policy support down the road.
Foreign IBs’ optimistic forecasts come as the South Korean economy has recently seen a roller-coaster ride amid a resurgence of the novel coronavirus.
Snapping a nine-session winning streak, South Korean shares ended 1.23 percent lower on Aug. 14 and plunged 2.46 percent last Tuesday.
The KOSPI sank 4.27 percent last week from a week earlier and it nose-dived 3.66 percent alone Thursday, the largest daily drop since the 4.76 percent plunge on June 15.
Local analysts voiced concern that the local stock market may take a hit from tougher COVID-19 restrictions that could put a damper on consumer spending and corporate results.