Stock market likely to take breather this week Korean shares, which rallied to their record highs last week, have more fuel to run higher in the long-term on the back of ample liquidity and increased expectations of an economic recovery, analysts said.
But the stock market may undergo some adjustments or gain only slightly this week because it has kept rising over the past two weeks without a major correction, they said.
"Because the market is now in a fundamentally strong situation where fund inflows remain steady, we believe the current bullish trend will likely continue for the long term," said market analyst Heo Jae-hwan at Tongyang Investment and Securities Co.
"But the bourses may undergo some adjustments in the next few days because they have risen too sharply nearly for two weeks," Heo said.
The benchmark Korea Composite Stock Price Index closed at a record high 1,152.50 points on Friday. The landmark close came after the index broke set new records for two previous days in a row on the back of a continuous inflow of funds into the equity market and a drop in oil prices.
The index has gained 28 percent this year compared with a 5.4 percent advance by the Morgan Stanley Capital International Asia-Pacific Index.
"Expectations of an economic rebound were factored into the rally, and market vulnerability has been reduced significantly as institutional buyers have emerged as the main force of investment," said analyst Seo Jung-kwang at Meritz Securities.
"A low interest rate and tight restrictions on real estate speculation have also spurred more people to invest in the stock market through various funds, enabling steady inflows of money," he said, forecasting that the KOSPI could advance up to 1,300 points by the end of this year.
But Seo added that the bourse is also likely to be weighed down this week by such factors as lingering worries about an upturn in oil prices and a U.S rate decision scheduled for Sept. 20.
UBS Securities also raised the target for the KOSPI to 1,400 points from 1,200 last week, citing a recovery in consumer spending and strong liquidity and likely better corporate earnings outlook for the second half.
The government said last week that Korea's service industry output rose at the fastest pace in nearly three years in July, bolstering hopes that private spending is gaining momentum. Sluggish domestic consumption, a result of the 2000-2002 consumer credit boom and bust, has been the main economic laggard over the past two years.
Daeshin Securities said that the local stock market is increasingly shifting into a structure of high profit and low risk, while it had been long considered a high risk investment and thus shunned by individual investors.
# The Korea Herald
- Sep. 13, 2005
- By Kim So-young
Blank
