South Korea’s main stock market is expected to gain further ground next year on a stronger economy with the key index breaching the 2,900-point level, local brokerages said Tuesday.
Driven by brisk foreign buying stemming from resilient corporate earnings, the benchmark Korea Composite Stock Price Index had been renewing all-time highs before going south in recent sessions. The KOSPI hit an all-time high of 2,557.97 on Nov. 3 before closing at 2,530.35 Monday.
In a research note, KB Securities Co. forecast the stock market to maintain its overall upturn in the coming year with the key index rising as high as 3,060.
“The current economic situation is very similar to that in 1986 when South Korea benefited from low interest rates, a weak U.S. dollar and low oil prices,” said Lee Eun-taek, a KB Securities analyst. “The KOSPI rose seven times between 1986-89.”
The weakness of the greenback, coupled with a strong Chinese currency, will likely spur an inflow of global funds into emerging markets next year, with falling crude prices coming as another boon to them, he said.
After leading the bull run of the local stock market this year, Samsung Electronics Co. the world’s top memory chip maker, and other semiconductor manufacturers are forecast to market perform next year, Lee noted.
The local bourse is predicted to gain traction from China’s property market and America’s investment in new growth engines, he said, adding the energy, steelmaking and machinery sectors may bask in the China momentum.
Korea Investment & Securities Co. also painted a rosy picture of next year’s stock market, projecting the KOSPI to reach the 2,900 level thanks to the economy’s strong performance.
“This year, the stock market rally has been led by chip and other ICT sectors, but growth momentum is expected to spread to other industries in the new year,” said Yoon Hee-do, chief researcher at Korea Investment & Securities.
Earnings of companies sensitive to the business cycle are forecast to rise considerably next year on the back of a recovery in domestic demand, with their share prices likely to be on an upswing, he said.
The brokerage house expected Asia’s fourth-largest economy to expand 3.2 percent in 2018 from this year on brisk exports and improving consumer spending. It added the Bank of Korea is likely to carry out two rate hikes in the coming year.
“Companies will likely be active in facility investments next year, bolstered by strong exports and domestic sales,” Yoon said. “Private consumption may also pick up due to a rise in real household income arising from stable raw materials prices and low import costs.” (Yonhap)