Seoul stocks tipped to trade higher next week on US relief package, IPO event

South Korean stocks are likely to continue choppy trading through next week but under a higher ceiling, following the recent passing of a US relief package and the injection of ample liquidity for a big initial public offering event set for next week, analysts said Saturday.

The benchmark Korea Composite Stock Price Index closed at 3,054.39 points Friday, up 0.93 percent from a week ago.

The KOSPI retreated for five sessions in a row through Wednesday as investors turned risk-averse on concerns about a US Treasury yields hike.

Market anxiety of early post-pandemic inflation strengthened the US currency to a nearly four-month high against the local currency Wednesday, dragging down the KOSPI to the 2,950-point level.

Stocks rebounded in the last two sessions to recover to the 3,050-point plateau, however, taking a cue from global rallies that stemmed from the passing of the $1.9 trillion American Rescue Plan.

Analysts expected the KOSPI to continue choppy trading in the coming week, but in a broader band with a higher ceiling compared with this week. 

The US stimulus could be a favorable sign for local exports of memory chips and autos, while a bond yields hike will remain the biggest risk in the local stock markets, they said.

The US Federal Open Market Committee meeting, to be held next Tuesday and Wednesday (US time), raised hopes of slowing down the bond yields hike. 

The IPO of vaccine maker SK Bioscience Co., slated for Thursday, is also expected to help invigorate the KOSPI market.

The bio unit of South Korea's No. 2 family-controlled conglomerate SK Group drew a record 64 trillion won ($56 billion) in investor deposits during its two-day subscription period this week, the largest sum in the country's trading history.

"The mega-sized IPOs in the past and their entailing price hikes have raised the overall liquidity of the stock market and caused their competitors' stock prices to appreciate," said NH Investment & Securities analyst Noh Dong-kil. (Yonhap)