Foreign Investors to Return to Seoul Bourse Soon
By Lee Hyo-sik
Staff Reporter
The Seoul Bourse is widely expected to resume moving upward toward the year's end after a short-term correction, on the back of attractive stock valuations, tamed inflation and other sound macroeconomic fundamentals here, with some analysts floating the possibility of the benchmark KOSPI breaching 2,000.
Chang Young-woo, managing director of UBS Securities Seoul branch, is one of these bullish optimists, projecting that the benchmark will reach 2,000 within the next 12 months as foreign investors will soon return to the local bourse and snatch up shares worth billions of dollars, as they did last year, on Korean exporters' continued strong performance.
``The recent stock market volatility is largely attributable to the projection that the nation's gross domestic product (GDP) will peak in the first quarter. The Korean economy will likely grow 6 to 7 percent during the January to March period from the previous year but the pace of the growth will slow down the road, with the GDP expanding 3 to 4 percent in the fourth quarter of 2010,'' Chang said.
He discounted the possibility of Korea falling into a double-dip downturn, saying the economy will grow at a steady pace in the future. ``The ongoing market correction will likely be moderate and short-lived. I think investors will soon come back to the local market, attracted by a host of undervalued stocks.''
The securities analyst said domestic makers of semiconductors, LCDs, cellular phones and automobiles continue to gain global market shares and generate larger earnings, adding rapidly growing emerging markets will boost the performance of Korean exporters.
``Korea ships about 70 percent of its outbound shipments to China and other developing economies. With strong overseas demand for products made here, the Korean economy will expand at a sustainable rate this year and next, adding to optimism that the local bourse will head upward,'' Chang said.
He said inflation will likely remain tamed for the time being on stable global oil prices, adding the Bank of Korea (BOK) will not likely go on a rate-hike campaign any time soon. ``Inflation is increasingly showing a negative correlation with stock prices as the economy matures. Tamed inflation and cheap borrowing costs will help fuel market rallies down the road.''
Chang suggested that investors buy value stocks against an uncertain economic outlook, saying the banking sector is heavily undervalued. ``Given local lenders' return on equity (ROE), bank stocks are overly underpriced. Banks are widely expected to show a better performance in the coming months and when the bull market returns, I think they will be the first to benefit.''
He also said blue chips in the information technology, auto, insurance and telecommunication sectors will be a good bet for investors.