SEOUL, Dec. 15 (Korea Bizwire) – Foreign investment firms are putting out a series of optimistic forecasts for the stock market in 2015, which are overall more generous than those of domestic firms. For example, Fidelity Worldwide Investment, the asset management firm with US$280 billion under management, said in a recent report on the Korean market for the new year, “Even though it is uncertain in what direction the market would move, there are many more positive factors in 2015 than this year.”
Fidelity went on to say, “Corporate profit that was on the wane last year is likely to rebound in the next year.” According to the asset management firm, the profit adjustment downward for firms in cyclically sensitive industries had already been made for the past three years, which will work to raise their profit levels upwards. The depreciation of the Korean won against the U.S. dollar seen in the recent few weeks will also be positive for exporting firms. “As for the level of domestic consumption suppressed for the past several years, it may rise somewhat due to the working of the base effect,” the report added.
It seems foreign investment banks doing business in Korea are betting on the Korean stock market’s boom-up next year. Goldman Sachs expected on December 2 that the KOSPI would climb up the 2,300 level thanks to improvement in financial results of Korea’s major exporters from about 1,900 today.
Goldman Sachs said, “Korea’s export performance and the stock market have remained at a standstill for years. Given the expectations that exports would grow 6-7 percent and the won-dollar exchange rate would move to a favorable direction, it will likely break free of the stalemate.”The American investment bank also predicted that the next year’s economic growth rate to be 3.8 percent, up 30-40 basis points from this year.
Earlier on December 1, Credit Suisse had put out its 2015 predictions for the Korean marketincluding a 10-percent increase in aggregate profits for Korean companies, with five top momentums including a rising number of Chinese tourists, higher dividend payouts, additional rate cuts by the Bank of Korea and recovery of the real estate market, Samsung Group’s governance structure reforms, inflow of money to the stock market as low interest rate regime continues.
Rating agency Moody’s also said Korea’s economic structure is much sounder than that for Japan. According to its recent report comparing credit ratings between Japan and Korea, Korea overwhelmed Japan in terms of economic performance and financial soundness. Unlike Japan swamped with huge fiscal debts, the report said, Korea is relatively in a better shape.When it comes to external security, however, Korea was more vulnerable to Japan as it is still confronted with a hostile regime in the north of the border, which affects negatively in its credit ratings.
There are, of course, naysayers to these rosy predictions, mostly from economic think tanks in Korea. For example, some argued that Japanese corporations have been quick to expand their investment in service markets in the ASEAN member nations while Korean counterparts have been slow to respond to the onslaught, running the risk of handing over hard-won markets in the Southeast Asia to their Japanese rivals.
The Institute for International Trade, affiliated with the Korea International Trade Association, said this on December 14 in a research report “Trend in Service Markets of Major ASEAN Countries,” which highlighted that the world’s eighth largest economy is fast emerging as a powerful consumer market.
Indeed, Japanese firms have increased their investment in this strategically important market to $10,836 million last year from only $1,277 million as late as 2010. In contrast, Korea’s investment in the region has shrunk to $399 million last year from $524 million in 2010.
By Sean Chung (email@example.com)