Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Global investment banks growing more skeptical over KOSPI rebound
An electronic board set up at Hana Bank's dealing room in Seoul shows the KOSPI's decline on Tuesday morning. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Global investment banks are growing more skeptical in their outlook for the Korean stock market amid rising inflationary pressure and the weakening local currency against the dollar.
The benchmark KOSPI has moved in a boxed range of 2,500 and 2,800 points for the past three months as the U.S. Fed has turned hawkish and started key rate hikes for the first time following the outbreak of the pandemic in 2020.
The Bank of Korea (BOK) is also scheduled to continue adopting more tightening of monetary policies for the next few months to attempt to tame inflation and remain in tandem with the Fed's foreseeable moves for additional big rate hikes.
Such woes have resulted in big declines of not just Korean stocks, but also U.S. stocks in the second quarter. Given that Korean stocks generally show a weak pattern following an overnight fall on Wall Street, they are widely expected to face volatility from a near-term perspective.
Last month, JPMorgan revised down its target for the KOSPI to 3,000 from the previous 3,300, citing factors such as the Fed's hawkish turn, upward inflationary pressure and the rising won-dollar exchange rate.
Goldman Sachs and Macquarie Group also cut down their KOSPI targets to 3,050 and 2,800, respectively, in June from earlier forecasts of 3,350 and 3,200 late last year. Macquarie remained more than pessimistic in its outlook for local stocks for similar reasons, and expected any near-term stock rebound here to end up in a dead cat bounce until the first quarter of next year.
According to data from the Korea Exchange, the main bourse closed with a slight gain of 1.24 percent at 2,670.65 last week compared with the week before. The KOSPI has failed to recover to the 2,700-point range since May 25 amid escalating fears on stock investment. The KOSPI also tumbled on Tuesday with a drop of 1.66 percent from the previous trading day.
Nomura Securities also turned more negative in its outlook for Korean stocks. In a recent report, the securities firm downgraded its opinion on Korean stocks to “neutral” from “overweight.” Even if the company did not share any specific target performance of the KOSPI, it cited lingering global stock volatility, China's economic slowdown and policy uncertainties here after the recent presidential election as the key reasons behind the outlook.
Most local securities firms expected the main bourse here to bounce back to 3,000 points by the end of this year in a best-case recovery scenario of key economic indexes such as exports.
EBest Investment and Securities forecast the KOSPI to continue its ups and downs in a band of between 2,500 and 2,920 until the third quarter on the Fed-driven monetary tightening and economic slowdown here and abroad.
“The KOSPI will be under downward pressure from a medium-term viewpoint for the next four months,” Shin Joong-ho, an analyst at the securities firm, said.
“For now, the rate of increase in exports and domestic consumption is on the slowdown and the figure will bottom out sometime around the end of the third quarter,” he said.