KOSPI Expected to Test 2,000 in Second Half
By Park Hyong-ki
Staff Reporter
Seoul stocks are likely to continue their bull run in the second half after taking a pause in July and August, analysts say. The benchmark index is expected to breach 1,900 points in either third or early fourth quarter, with a growing number of analysts betting the index will rise above 2,000 toward the end of the year.
Their optimism is based on expectations that enterprises will post stronger earnings and the economy will become more positive in the remainder of the year.
Analysts said that shipbuilding, steel and machinery stocks will maintain their strength, and techs, automobiles and securities are expected to turn stronger in the second half.
Hyun Kyung-woo, a researcher at Daishin Securities, forecast that the KOSPI will make a bull run to between 1,950 and 1,980 points, backed by a revival of tech stocks in the latter half.
``We believe chips and other IT stocks will recover on rising demand overseas,'' said Hyun. ``Tech stocks are likely to re-draw attention from foreign investors for a climb on the main bourse.''
Daishin expects the KOSPI to reach its peak in the fourth quarter, with the bottom for the index estimated at 1,650.
How Samsung Electronics will perform is expected to become one of the key variables determining the course of the market in the second half.
Samsung Electronics shares under-performed the market in the first half on falling memory chip prices. Its market capitalization once fell below 10 percent of the total market cap, but settled up at 11 percent as of last Wednesday down from 14.3 percent last December.
CJ Investment & Securities, which predicts the benchmark index to hit at least 1,950, echoed that the KOSPI will be boosted by such IT stocks, as the chip market already hit bottom over the past months.
``It's time to climb back up, and this usually happens in the third quarter especially for the IT industry,'' said Cho Ick-jae, head of research at CJ.
Demand for chips, computers and other commercial electronics goods tends to rise from the third quarter on seasonal factors.
Cho added that export-related stocks such as automobiles will also perform strongly in the second half.
Daehan Investment & Securities gave the most optimistic forecast for the main bourse, forecasting that the key index will hit as high as 2,030, as the stock market is due to experience further re-ratings going forward.
``Attractive stock prices and positive corporate earnings are likely to give the benchmark index a big boost over the next six months,'' said Kim Young-ik, research head at Daehan. ``With the momentum, we believe the price-earnings ratio will reach the emerging markets' average of 13.8 times.''
Daehan also said that IT and communication services stocks are expected to make a comeback and outperform the broader market.
Among other brokerage houses, Samsung Securities expects the KOSPI to trade between 1,580-1,950 in the second half. Korea Investment & Securities expects the index to reach 2,000 points either in the third or early fourth quarter.
Analysts believe that stronger corporate and economic fundamentals underlie the market's strength. At the same time, the expected inclusion of the KOSPI into international indices of developed nations will also boost the broader market, they said.
Variables Ahead
Analysts, however, cautioned that there are some internal and external uncertainties. Among major concerns are the possible tightening of monetary policy by China and other nations and possible fall in U.S. housing prices.
``The greatest concern is the weak U.S. housing market, which can weaken investor sentiment,'' said Cho of CJ Investment & Securities.
Although a moderate inflation kept the Fed from raising its key interest rate, worries linger over its poor employment market, which can also set back consumer sentiment, analysts said.
The other concerning factor is a further appreciation of the won against the dollar and yen, analysts say. If the won continues to gain against major currencies, a recovery in automobile and other exports-oriented stocks could be delayed. Rising oil prices are also feared to undermine recovering domestic consumption.