By Kim Yoo-chul
Staff Reporter
With a growing positive outlook on stocks, fund analysts say retail investors need to hold on to their equity funds, rather than redeeming them in fear of corrections on the broader market.
After breaching 2,000 points Wednesday, the market underwent a severe correction Thursday. The KOSPI closed down 40.68 points at 1,963.54.
Although some market analysts are showing concerns that the market may suffer more corrections, many see strong economic fundamental work in favor of further medium-term gains. Analysts said the nation's stock market is now in the middle of a structural change.
Citing retail investors' aggressive move into stocks, fund analysts say it could be the right time for retailers to increase exposure to fund products by regularly investing in stocks via installment funds.
As of July 24, the total amount of money that South Koreans have poured into local equity funds exceeded over 71 trillion won, data from the Asset Management Association Korea showed.
`` When the KOSPI reached 1,500~1,900, retail investors questioned whether the index would go further. Feared by the possibility of corrections, some of them reaped short-term profits,'' said Hong Ki-seok from Samsung Investment Trust Management.
``Retail investors now regard investment in stocks as long-term asset management schemes rather than speculative ones,'' he added.
To lessen and diversify risks on investments, analysts suggest that retail investors buy equity funds that are much safer than direct stock investment.
``As the KOSPI opens a new chapter, investors will take different approaches investing in individual stocks,'' a fund manager from KB Asset Management said. ``For retail investors these procedures are not easy,'' she added.
According to Zeroin, an independent fund tracker, 376 equity funds with more than 70 percent of its capital invested in local stocks yielded an average of 50.3 percent return on six-month investment of July 24.
``With the KOSPI seen rising as high as 2,400 points at the end of this year, investors don't have to redeem their funds for fear of possible corrections,'' said Chung Joon-ha, a senior portfolio manager from Daehan Investment Trust Management.
``Investors may need to focus on funds targeting exporters and mid-cap shares such as shipbuilders, automakers and semiconductors because export-driven shares have been highlighted as a good bet thanks to the recovery of the domestic economy and growing local and overseas demand,'' Chung added.
Analysts advised not to sell at corrections, as the mid- to long-term outlook is positive on external and internal positives.
``The correction itself may continue several months, but I do not think of it as a signal to an end of the much longer-term bull market, given the still attractive valuation level and earnings outlook set to continue at a good pace'' Chung said.