Which Stocks Will Shine Next Year?
By Yoon Ja-young
Display and China related stocks will lead the market next year while there seems to be no way out for banks, according to analysts.
China was the theme of the stock market this year, with shipbuilding and steel enjoying an unprecedented growth in demand from the emerging market. Hyundai Heavy Industries, which traded at 125,000 won on Jan. 2, closed at 462,000 won Thursday, and POSCO doubled from 305,500 won in the beginning of this year. Also notable was Seoul bourse's decoupling from the U.S. stock market. Now it moves with China.
China stocks will continue to lead the market, though they won't be as influential as this year, according to analysts.
``China is the growth engine of the global stock market. The rise would continue unless China and other emerging markets slow down,'' Hanwha Securities analyst Yoon Ji-ho said. He picked shipbuilding stocks for 2008.
Shinyoung Securities picked shipbuilding and shipping. ``The shipping industry is expected to see record high earnings in the first half next year, thanks to the continuous rise of rates for bulk ships,'' said Cho Yong-jun, head of the research center at the securities company.
The year 2007 was harsh for the display industry, but the sun will shine again next year. Display was the top pick of many securities firms. With the price of 40-inch TVs falling close to $1,000, demand is growing explosively. Beijing Olympics is also adding to the demand.
``Most notable is the strategic change of panel producers. They suffered from excessive facility investment and cutthroat competition for market share, but they will maximize profitability by enhancing the facilities' productivity in 2008,'' SK Securities analyst Lee Sung-jun said. He estimated the LCD TV market to grow 32.2 percent next year, with the Chinese market seeing a remarkable 88.5 percent growth.
Woori Investment & Securities also estimated that the growth of LCD supplies will slow down, although demand will stay solid. ``There will be a paradigm shift, from market share war, to emphasis on profitability.'' It pointed out that the industry is seeing facility investment decrease, while elastically operating existing facilities. Shinyoung Securities said the future of LCD panels will continue to look good even after 2008.
SK Securities noted that despite a rather sluggish domestic market, construction orders from overseas marked a record high, exceeding $30 billion in 2007. The plant and infra construction projects in oil rich countries and new city projects in Asia, most notably in Vietnam, saved construction companies. It pointed out that despite the low cost threat from China and India, Korea remains a competitive player in plant construction for its experience and technology. Plants take 66 percent of total overseas construction orders from Korean firms.
There seems to be no way out for banks in 2008, which already were excluded from the 2007 rally. Growth would slow down, and net interest margin isn't likely to recover, according to SK Securities. ``The interest rate for savings rose due to competition not among banks themselves but rather with other financial market sectors. ``There is merit in the low stock price as they were excluded from the 2007 rally, but it is unlikely that the banks will escape the fluctuation box,'' said SK Securities analyst Shin Kyu-kwang.