Pyongyang Summit Less Likely to Pump Up Stocks
By Park Hyong-ki
Staff Reporter
The summit between the leaders of the two Koreas slated for the end of August helped boost general sentiment in stocks Wednesday but analysts said that the news is less likely to boost the market in the long term.
They said it's obviously good news but any positive impact will most likely to be short-lived.
Cheong Wa Dae announced Wednesday that President Roh Moo-hyun and North Korean leader Kim Jong-il will hold a summit from Aug. 28-30 in Pyongyang.
``It's symbolic, and the meeting could excite investor sentiment. But it will be short-lived as we experienced in the past with the first landmark meeting,'' said Lee Woo-hyun, an analyst at Kyobo Securities.
Lee stressed that the market will be more susceptible to what the summit produces rather than the summit itself.
But the market is already expecting that there will be little chance for it to produce any solid substance that gets both sides to further strengthen bilateral economic ties.
He said the meeting will contribute to spurring stocks related to North Korean business such as construction and tourism though.
Chi Ki-ho, an analyst of Seoul Securities, echoed Lee's words saying that such an event won't hype Seoul stocks up as much as last time.
``Seoul stocks have been and always will be driven by fundamentals, and since the summit is more of a political play, I believe its influence on the market will be lot less than the first time around,'' said Chi.
Kang Moon-sung, an analyst of Korea Investment and Securities, also said, ``The market's momentum lies with strong fundamentals rather than special political events.''
Given the 2000 landmark summit which proved to have less of an impact on the main bourse, Kang said the August meeting is highly likely to have the same effect since the market has gradually become immune to politics over the years.
``The stock market has shown little sensitivity toward issues concerning North Korea, including the nuclear crisis, since the 2000 summit,'' said Kang. ``What this means is that politics and the economy are separating.''
In April 2000 when the presidential office announced that it would hold a summit in Pyongyang, Seoul stocks climbed 11 percent up to June, according to Daewoo Securities.
However, on June 15, the day of the summit in 2000, stocks plunged 6 percent, and foreign investors' stock purchasing started to slow down. Since the summit, stock prices only rose 5 percent for a month before undergoing corrections for the rest of 2000.
``This shows that sound fundamentals draw the broader market picture,'' said Kim Sung-joo, an analyst at Daewoo.
Shares of Hyundai Elevator and its sister firms posted strong gains on expectations that they will benefit from Hyundai Group's North Korean business projects.
Hyundai Elevator closed up 6.1 percent at 156,000 won and Hyundai Merchant added 9.1 percent to close at 51,400 won. Hyundai Securities also added 3.3 percent, up to 31,400. Unlisted Hyundai Asan is leading tourism and other business projects in the North. The benchmark KOSPI closed up 2.34 percent at 1,903.41.