M&A Themes Bolster KOSPI
Mergers and acquisition speculations are sweeping global stock markets and it is no exception for the Seoul market, analysts said. They expect M&A themes will provide a catalyst for the local bourse to maintain its strength in the mid-to long-term.
On top of positive economic data pointing to stronger economic rebound, M&A speculation in association with POSCO and a number of other companies are further spurring investor sentiment.
``This is a global trend,'' said Cho Seong-joon, an analyst at Meritz Securities. ``From the U.S. to Korea, M&A themes are accelerating broader stock gains.''
Investors are hunting for bargains among companies linked to M&A speculation. They are looking for firms that will be lifted from various debt-restructuring programs in the aftermath of the financial crisis in late 1990s.
Daewoo Shipbuilding & Marine Engineering, Korea Express and Hyundai Engineering & Construction to name a few are such companies on the list of firms that will be auctioned off. These stocks have outperformed the broader market.
POSCO and Hyundai Steel are also receiving a big boost, driven by a tidal wave of global consolidations kick-started by Mittal Steel's takeover of global No. 2 Arcelor.
Securities firms are no exception. The nation's securities industry has been overcrowded with too many small brokers. They will undergo industry consolidation going forward.
Rekindling M&A speculation, Woori Investment & Securities CEO Park Jong-soo recently said that the broker will seek to merge or take over an unspecified large brokerage house.
Also, the government's efforts to pass the Capital Market Consolidation Act, which eliminates business boundaries between brokerage, futures and asset management is promoting M&As for the development of big investment firms that can equally and internationally compete with Goldman Sachs and Merrill Lynch.
``M&A themes helped boost the value of Seoul stocks,'' said Cho of Meritz. ``With risks concerning the security of Korea getting lower, investors around the world are finding it attractive to invest in stocks here.''
However, others comment that M&A themes are just a minor part that helped Seoul stocks to climb.
Despite China's tightened monetary policy and higher trading taxation, Korea's stock market has stayed on its course for momentum mostly because of the nation's rosy economic indices.
``It has more to do with Korea showing bright data from the services and manufacturing industries rather than M&A themes,'' said Kyung-woo Hyun, an analyst at Daishin Securities. ``M&As are not the most important factor to the bull run. They are simply raising expectations for M&A-targeted companies, which we do not know when M&As for such firms will actually take place.''
But that is likely to further boost the local bourse, which analysts believe will touch near 2,000 points by the year's end.
By breaking the benchmark 1,700 points, Korea became Asia's fifth nation to surpass $1 trillion in market capitalization, following Japan, Hong Kong, China and India.