Shares to remain bearish on foreign selling this week

Korean shares are expected to remain bearish this week as foreign investors could continue slashing their exposure from emerging countries amid growing inflationary pressure, analysts said Saturday.

The benchmark Korea Composite Price Index (KOSPI) closed at 1,977.19 on Friday, down 4.58 percent from a week earlier, driven by a massive sell-off by foreigners, who dumped more than 2 trillion won (US$1.77 billion) worth of shares in net during the last three trading days.

Most shares lost ground, with the banking and transportation equipment sectors plunging around 5 percent. Machinery, construction and retail shares also fell sharply.

Analysts said that the foreign sell-off appears to be in line with their ongoing withdrawal from emerging markets where inflation pressure is building up on fears that higher prices could reduce their profit.

They also noted that foreigners are now moving to advanced nations such as the United States whose economy is showing signs of gaining momentum.

The strong won is another concern among investors and a possible rate hike by the nation's central bank in March added to worries that exporters might suffer as it could put additional upward pressure on the won's value.

"Foreign investors could continue to reduce their investment as the belief is holding up that the central bank will raise the interest rate in March. This is coupled with relatively sluggish fourth-quarter corporate earnings and bleak profit outlooks affected by the strong won," said Bae Sung-young, a market analyst at Hyundai Securities.

Some other analysts, however, cautiously predict that the market could undergo a technical rebound from last week's plunge. They also rebuffed the argument that money has started to exit from emerging markets in full swing, saying that economic conditions there still remain more favorable than those in advanced countries. (Yonhap)