Foreign IBs expect KOSPI to top 2,000 mark at year-end

Foreign investment banks have painted a rosy outlook of the Korean stock market, projecting the main index to break the 2,000 barrier at the end of this year, a report showed Wednesday.

Five of the eight surveyed investment banks, including Barclays and Credit Suisse, said the Korea Composite Stock Price Index (KOSPI) is likely to surpass the cited level as it gains upward momentum in the second half, boosted by easing eurozone woes and improving economic conditions, according to the report by the Korea Center for International Finance.

Goldman Sachs cited cooling inflation, a possible rate cut and the strengthening Korean won as factors that could shore up the KOSPI to the 2,100 mark at year-end.

Barclays said strong exports will help boost the stock index to the 2,270 level as robust shipments to emerging economies offset declining demand in Europe and the United States.

The investment banks, however, raised concerns on high volatility and forecast the KOSPI to suffer a tough period in the first half amid external uncertainties, according to the report.

Market and political uncertainties, such as the eurozone debt crisis and upcoming elections in major economies, are likely to heighten volatility in the local stock market, they said.

Daiwa said the KOSPI is likely to move in the 1,700-2,100 range. The index is likely to dip to its yearly low in the first half due to financial uncertainties stemming from massive eurozone debt maturities and a global economic slowdown before rebounding in the second half, it said.

Nomura projected the stock index to go through a roller-coaster ride in the first half but gain ground in the second half as domestic economic circumstances and corporate fundamentals recover.

The report also said although foreign investment banks illustrated a positive outlook, they became less favorable to the local stock market compared with a year ago.

Seven of 10 investment banks recommended investors increase their portion of South Korean stocks last year, while only four of nine investment banks recommended the strategy this year, it said.

In 2011, the KOSPI slumped 11 percent, but fared better than the stock markets of emerging economies, which saw a 14.9 percent drop on average. (Yonhap)