South Korean stocks are expected to climb at a moderate pace this week, as eased woes about an early U.S. stimulus cut and positive signs in the eurozone and China will spur stable demand for risky assets, analysts said.
The benchmark Korea Composite Stock Price Index closed up 1.97 percent to 2,006.23 last week from a week earlier. The main index was fueled by growing market expectations that the U.S. won’t start trimming the monthly $85 billion bond-buying following dovish remarks by Federal Reserve chair nominee Janet Yellen who said the U.S. economy needs support.
The Seoul bourse also got a boost from the outcome of China’s policy meeting that ended at the beginning of this week, in which Beijing rolled out easing measures for its economic reform, including scrapping its one-child policy.
Analysts said local stocks will move up at a steady clip this week as the direction of such policies in major economic powers bodes well for further foreign inflow in Seoul.
“Europe has shown indications that it may take another stimulus measure to boost the economy. China’s policy meeting has raised hopes that the reform will spur more demand for consumption, which all could push up the KOSPI,” said Han Chi-hwan, an analyst at KDB Daewoo Securities Co.
But Han noted that a prolonged downturn in local industries, with big firms struggling to stay afloat against cash shortages, remains as downside factors that weigh down the stock market.
“Builders and brokerage firms are facing high risks of restructuring. We need to be mindful of this given the overall weaker third-quarter corporate earnings,” he added.
Last week, foreigners bought a net 27 billion won worth of local equities, with institutions also snapping up a net 77 billion won. Retailers dumped a net 36 billion won.
Shipping and logistics firms were the biggest decliners, losing 4.1 percent, followed by telecom companies with 3.4 percent and banks with 2 percent.
In contrast, state-run utility firms soared nearly 8 percent on the government’s decision to raise the rate by an average 5.4 percent. Foodmakers also gained 2 percent. (Yonhap News)
