Stock Market Turns Attractive on Three Lows
By Yoon Ja-young
Staff Reporter
Many people here regard the late 1980s when the country hosted the Olympics as a ``Goldilocks'' era, a time when the economy was in perfect shape. While it seems to be heading south now, Samsung Securities said there are some hopeful similarities with golden days emerging.
The securities company said it is time to invest in stocks, citing ``three lows'' that came back after nearly two decades.
The definition of ``three lows'' slightly differs among experts, but generally refer to low interest rate, low oil prices and the low evaluation of the local currency. ``Conditions in the late 1980s, when the country enjoyed the best economy in its history thanks to the three lows, are coming back to the bourse,'' said Kim Sung-bong, an analyst at Samsung Securities.
Back in the late 1980s, the country enjoyed the Goldilocks, or high economic growth and booming exports amid low inflation. The economy recorded a double-digit growth rate for three years in a row from 1986, and foreign investors were attracted to the Seoul bourse, with the main index KOSPI breaking 1,000 points for the first time.
Back then, the concern over a global economic recession was also deep, but that brought about aggressive stimulus packages worldwide, according to Kim.
``The most direct benefit from the three lows would be increasing exports. When the United States implements an economic stimulus package, Korean products, which have a competitive edge in prices, will benefit,'' Kim said, citing IT and automobiles as the industries benefiting most.
When compared with the worst of times, the economy satisfies the ``three lows.'' Oil prices fell over 70 percent from last July when they recorded $147 per barrel, and the interest rate and the valuation of the won also fell deep from their peaks.
However, many still doubt an optimistic scenario. The country's major exporters in the IT industry aren't so dependent on oil now, unlike manufacturers in the 1980s. Price competitiveness was important for exports, but not now. The global economy isn't as good as in the 1980s, which means the export market also won't be that good.
Pessimists say that foreigners recently came back to the bourse, only to gain from the low price following excessive plunges last year and the weak Korean won. Hence, they are likely to desert the market after reaping a profit.