By Park Hyong-ki
Staff Reporter
Analysts warn investors to brace for more downfalls on the stock market as uncertainty will persist over the global credit crunch stemming from the United States.
Even though the U.S. government is rigorously trying to persuade Congress to nod on the rescue package for ailing financial firms hoping to prop up confidence, market watchers say such a move will not buoy the markets over the long-term.
``The U.S. is facing a budget deficit and is on a down cycle on worsening micro circumstances,'' said Lee Jung-min, an analyst of Korea Investment & Securities. ``I can't imagine how it will effectively carry on the rescue plan.''
She said the $700 billion bailout deal to buy distressed assets of financial firms will boost investor sentiment, but will be short-lived, adding that general agitation remains over the fate of the U.S. economy.
``We can see a technical rebound going forward, but it will be for a brief moment,'' said Lee.
Seoul stocks tumbled after gaining for five straight sessions, in spite of overnight gains on Wall Street where optimism built up surrounding the rescue package.
The benchmark KOSPI shed 25.3 points, or 1.68 percent, at 1,476.33, while the tech-laced Kosdaq plunged 2.69, or 0.6 percent, at 448.34.
The Dow Jones Industrial rose nearly 200 to 11,022.06 Thursday.
Korea Investment projects the benchmark KOSPI will fluctuate between 1,450 and 1,850 over the next six months.
The general consensus is building up toward the U.S. entering a recession early next year.
Samsung Securities analyst Oh Hyun-seok also noted, ``The global slowdown will inevitably hurt consumption in the U.S. and Europe, while wither investments in emerging markets.''
In addition, corporate fundamentals are expected to worsen in the fiscal quarters ahead.
Samsung forecast the benchmark KOSPI to perform between 1,320 and 1,715 in the fourth quarter.
``The rescue deal will abate uncertainty somewhat, which is a positive thing,'' said Oh.
The analyst projects industrial stocks such as energy, shipbuilding and machinery will perform relatively stably, in contrast to IT and financial shares.
Meanwhile, Lee of Korea Investment, said, ``I'm afraid to say that all sectors look gloomy.''
She expects the food and beverage sectors may somewhat serve as defensive stocks against the bearish market. ``They are a necessity to the economy, even amid a down cycle,'' she said.
The U.S. government has drawn up plans to absorb bad assets of financial firms on Wall Street, after a string of collapses, with one notable Lehman Brothers.
President George W. Bush has appealed to lawmakers to quickly approve the lifeline program to prevent further crippling of the global financial system.