By Kim Tae-gyu
Staff Reporter
Despite bullish runs over the past few months, market analysts are churning out upbeat outlooks about the local equity market, forecasting that the key index KOSPI will continue on a surge in the future.
Most analysts said that market rallies will continue this year on strong corporate earnings and economic recovery, ruling out the possibility over a double-dip downturn that the economy will slip into another slump before seeing a sustained recovery.
One foreign entity said that the benchmark KOSPI would rocket more than 15 percent further this year, the most optimistic prediction up until now.
Deutsche Bank said Tuesday that the KOSPI has a shot at rising to as high as 1,830 at the year-end from the current level of around 1,580. It also upgraded its rating on the KOSPI to ``overweight" from ``neutral."
Thus far, IBK Securities has been the most optimistic brokerage in predicting the KOSPI coming up with 1,750 points for this year's high. The record high was 2,064.85 reached late 2007.
``In the second half of 2009, the Korean market will be driven by multi-year structural themes of global market share gain by leading Korean exports names in the recession-led industry consolidation,'' it said in a report.
``The market will be driven also by a growing footing in China riding on China's consumption growth momentum and the start of a valuation re-rating process for the financial sector with better-than-feared asset quality,'' it said.
Korean securities firms are less optimistic than Deutsche Bank but most of them also project that the stock prices would head upward for the time being thanks to foreign investors.
Overseas players have snapped up shares of Korean outfits worth 17.5 trillion won this year, thus boosting the KOSPI and the tech-heavy KOSDAQ.
The KOSPI once slipped below the 1,000 mark in early March amid concerns of a renewed crisis, but the index has appreciated up to 60 percent since then.
``From 2005 throughout 2008, foreign investors sold off Korean stocks worth 77 trillion won before they changed their position this year,'' Woori Securities analyst Lawrence Kim said.
``Suppose that foreigners recoup half of their original investment ― they will buy back half of 77 trillion won. Then, fresh funds of more than 30 trillion won will be funneled into the Seoul bourse."
Hyundai Securities released a similar report that foreigners would have room to snap up 35-trillion-won worth of stocks over the long haul.
``The good news is that long-term capitals keep flowing into the local market as foreign investors increase the proportion of Korean stocks in their portfolio,'' Hyundai researcher Cha Eun-joo said.
``This would be sure to underpin the domestic stock market. With stable demand popping up, share prices would remain strong in the future,'' she said.
As offshore players are expected to continue to take a long position in the Seoul market, analysts are staging a competition to paint as rosy a picture as possible.
Woori Securities upgraded their prediction on the yearly high of the KOSPI on Tuesday from 1,590 to 1,710. Hyundai Securities also revised the figure from 1,550 to 1,700.
For some pessimists, however, the future is not the bed of roses.
Samsung Securities said of late that the KOSPI is feared to fall to as low as 1,120 when the double dip weighs on the economy both at home and abroad.
``Obviously, optimistic atmosphere sprouts up at the moment as the global economy stabilizes. We think the KOSPI may rocket to 1,850,'' Samsung economist Kim Seong-bong said.
``But we should not turn a blind eye to the downward risk when the economy suffers another slump. Under the worst-case scenario, the KOSPI might plummet to around 1,120.''
When the nightmarish scenario realizes, large-sized corporations that the world believes are strong would collapse just as Lehman Brothers did last September, according to Kim.
Korea Investment and Securities is also pessimistic.
``The high-flying share prices are propped up by good corporate performances and rich liquidity channeled by the government,'' said Na Jung-oh, an analyst at Korea Investment.
``But the liquidity will not last forever. Sometime a good part of it will evaporate. Plus, respectable corporate performances were backed up by cost savings and a survival effect rather than improved fundamentals.''
The survival effect: The country's flagship firms such as Samsung Electronics and LG Electronics gobbled up the market shares of their rivals that folded during the financial crisis.
As a result, they announced an earnings surprise over the second half of this year.
``The share prices are not likely to go further upward. In my view, we are almost there,'' Na said.