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| Dealers at work at Hana Bank in Seoul, Thursday. Yonhap |
By Lee Min-hyung
The Korean stock market is feared to face an adjustment period on escalating fears of recession and conglomerates' dismal earnings outlooks, analysts said.
The outlook came amid growing skepticism over major firms' earnings growth on falling demand for Korea's major export items.
Samsung Electronics recently reported an estimated drop of 69 percent in its operating profit during the fourth quarter, in its preliminary earnings report. LG Electronics is also widely forecast to suffer an earnings shock for the same period, after reporting an estimated operating profit of 65.5 billion won ($53.2 million), which is down 91.2 percent from the previous year.
The uncertain economic outlook adds more woes to the local stock market. According to the latest announcement by the Bank of Korea (BOK), the economy contracted 0.4 percent in the last quarter of 2022 on dwindling exports and a consumption slump, for the first time since the second quarter of 2020.
The negative outlook is in contrast to the benchmark KOSPI's robust rally which has lasted since the beginning of this year. According to data from the Korea Exchange, the main bourse reported solid growth this month on foreign investors' mass buying spree. The KOSPI was around 2,200 points at the start of this year, but has since been on the gradual rise to over 2,450 until Thursday.
But experts advised investors to be wary of the possible readjustment of the stock market due to such aforementioned factors.
"The upcoming result of major firms' earnings performance will be a critical factor affecting the future movement of local stocks here," Choi Yoo-joon, an analyst at Shinhan Securities, said.
"If we can detect any positive signs beyond the market's expectation, the stock market will be able to extend its ongoing upward momentum, and vice versa."
But most firms are not showing any clear signs of an earnings recovery for the time being, and they are counting on the economic reopening of China, the analyst pointed out.
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