KOSPI gains momentum, remains undervalued

The South Korean stock market has advanced sharply this year on increased appetite for risky assets, but it remains undervalued due to a lack of confidence in corporate earnings and economic fundamentals, data showed Tuesday.
  

The benchmark Korea Composite Stock Price Index ended at 2,045.4 points as of April 3, up 6.8 percent from the start of this year, as it made some gains after having been outshone by the tech-laden KOSDAQ earlier this year, according to data compiled by the Korea Exchange.
  

Despite the strong gain, the local bourse was ranked No. 22 among 46 major markets in Europe and Asia, the main bourse operator said.
  

Six markets in Europe, including Germany, Denmark and Italy, soared more than 20 percent so far this year, while 13 other markets, including China, France and Russia, climbed nearly 20 percent, data showed. 
  

This year, China's Shanghai Stock Exchange Composite Index surpassed the 3,500-point level for the first time in seven years, while Japan's Nikkei 225 Stock Index, the nation's most widely quoted index, rose to the highest level since 2000.
  

The bull markets soaked up offshore funds following the European Central Bank's additional quantitative easing programs and the U.S. dollar's appreciation against its major global peers, coupled with aggressive stimulus measures by their governments.
  

Although the Seoul bourse saw a capital inflow after the Bank of Korea cut the key interest rate to a record low level last month, South Korean shares are still considered undervalued relative to stocks in advanced markets.
  

The MSCI Korea Index's price-to-earnings ratio, an indicator of equity valuation, went slightly up to 10.1 as of April 1, but the figure ranked 38th out of the 46 markets.
  

A PER is a stock's market price per share divided by its annual earnings per share to represent a company's shares relative to the income it is actually generating.
  

Market watchers said the weaker-than-expected growth momentum and lingering economic uncertainties have limited gains in the Korean equity market.
  

"The Korean stock market was relatively sluggish as its fundamentals were not attractive enough to lure funds," Lee Ah-ram, a researcher at NH Investment & Securities, said.
  

"There is still room for further growth for undervalued emerging Asian markets, such as Korea and Taiwan, if the U.S. postpones its interest rate hike and additional quantitative easing pumps money into the global equity market." (Yonhap)