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| Dealers at Hana Bank work at a dealing room at the lender's headquarters in Seoul, Wednesday. Yonhap |
By Lee Min-hyung
Stock investors are advised to increase cash and other safer assets such as gold and dividend stocks in their asset portfolio, as growing fears of a recession will keep posing a risk to the benchmark KOSPI, analysts said.
The main bourse has been on a sharp decline, falling to around 2,300 points for the past month. It closed at 2,292.01 Wednesday, down 49.77 points from the previous day. However, market analysts predicted Korean stocks might tumble further, at least until the end of this year.
The outlook came as multiple risk factors, such as the war between Russia and Ukraine, China's zero-COVID policy and strong monetary tightening, have put downward pressure on the economy.
Daishin Securities analyst Lee Kyoung-min expects the KOSPI to suffer a bigger loss until the first quarter of next year.
"The likelihood of recession will keep growing, as rising prices and hawkish monetary policies here and abroad are feared to weaken economic growth and corporate earnings for a year since the second half of this year," he said.
The analyst advised retail investors to increase the volume of cash in their asset portfolios due to volatile financial market conditions.
"When local stocks achieve a possible technical rally, investors should secure more cash and build a defensive portfolio," he said. The brokerage house estimated the main bourse might achieve a rally in July under its short-term outlook, but the KOSPI is exposed to possible risks of additional falls until the first quarter of next year because of the global downward economic cycle.
Eugene Investment & Securities analyst Huh Jae-hwan also expected the main bourse to bottom out at 2,050 points due to possible earnings declines at Korean firms amid widening economic uncertainties.
"Given the soaring won-dollar exchange rate, the financial market here considers the status quo worse than the period when the economy was grappling with the pandemic shock," he said.
After the U.S Fed started increasing its key rate in March this year, global stocks have nosedived. Monetary authorities ― including the Bank of Korea ― have reiterated their intentions to take a more hawkish policy approach. Korean stocks have also lost momentum for a rally in the past few months.
The uncertain financial environment also pushed up the valuation of the U.S. dollar by a huge margin this year. The won-dollar exchange rate topped a worrying level of 1,300 won on a growing preference for safer assets.
