What’s the Problem With Stock Markets?
Seoul Stocks End 8-Session Skid
By Kim Tae-gyu
Staff Reporter
Seoul shares on the main bourse wrapped up their eight-session losing streak to reach the psychologically important 1,000 mark thanks to foreign investors' purchases.
The benchmark KOSPI rocketed 55.04 points, or 5.8 percent, to close at 1,003.73, while the junior KOSDAK rose 17.06 points, or 6.25 percent, to 290.12. The Korean won also gained slightly to end at 1,495 won per dollar, up 2 won from Thursday's close.
``The news that struggling U.S. financial firms such as Citigroup or AIG will dispose of ailing subsidiaries boosted investors' sentiment,'' Samsung Securities analyst Kim Seong-bong said.
``In particular, foreigners snapped up 11 billion in stocks in the main bourse after selling eight days in a row. That helped the share prices retake 1,000,'' he said.
Tracking the overnight plunge in the United States, the KOSPI opened on a weak note at 929.74, or 2 percent lower than the previous close.
The Dow Jones Industrial Average tumbled 5.56 percent Thursday and the tech-loaded Nasdaq composite index also plunged 5.07 percent on the deepening woes of the financial crisis.
The KOSPI continued to plummet to a daily low of 914.02 in about half an hour after the market opened but began to reverse the trend in the morning sessions on the Citigroup and AIG headlines in the U.S.
The rebound picked up in the afternoon, as local institutions started to snap up shares, thus forcing the Korea Exchange, a bourse operator, to resort to a side-car scheme under which transactions of futures products are banned for five minutes.
Technology bellwether Samsung Electronics surged 4.49 percent to 442,000 won and rival Hynix Semiconductor also gained 4.23 percent to 6,600 won.
The country's biggest shipyard, Hyundai Heavy Industries, climbed 14.8 percent to 143,500 won and Samsung Heavy Industries also soared 15 percent to 19,950 won.
A total of 592.1 million shares, worth 5 trillion won, changed hands. Winners outnumbered losers 658 to 188.
Prospects ― KOSPI 510?
At the moment, nobody seems to have come up with any bright outlooks despite Friday's short bullish run. Even brokerages, which usually paint rosy pictures on the economy, compete to downgrade prospects.
Shin Young Securities predicted Friday that the KOSPI may fall to 510 under the worst-case scenario, although the possibility is below 10 percent.
Shin Young analyzed that the nightmarish situation would occur if things evolve terribly locally and globally, particularly in the U.S., China and here.
Three conditions of the appalling scenario for 2009 are China's growth rate falling to around 5 percent; domestic house prices plunging more than 30 percent and the U.S. economy suffering a hard landing.
``Under a doomsday scenario, analysis shows the range of KOSPI movements between 510 and 1020 next year,'' said Kim Se-jung, a senior analyst at Shin Young Securities.
``We see its likelihood at less than 10 percent, though. Our benchmark scenario predicts the KOSPI would move between 900 and 1,450 throughout 2009,'' he said.
SK Securities, which has yet to announce its prediction for next year, is basically on the same page with Shin Young.
``In the face of so many uncertainties in the market at home and abroad, it is really difficult to present high figures,'' SK Securities economist Kim Young-jun said.
``In a benchmark situation, the KOSPI would be somewhere between 800 and 1,300 next year. At best, the index is not likely to top 1,400,'' he said.
In the meantime, Samsung Securities publicized only the highest possible index of next year as between 1,320 and 1,540 without specifying the downward limit.