Kospi undergoes most bearish H1 in 5 years

The Kospi, a benchmark index representing South Korea’s top-tier market, experienced the most bearish first half this year in five years, data showed Monday.

From January to June, the Kospi fell 5.7 percent to 2,326.13, the sharpest since a 6.7 percent drop in the first half of 2013, according to data compiled by the Korea Exchange.

Analysts cited a market impact from US-China trade war threats and strengthening US dollar that are associated with sluggish earnings of local manufacturers in the second quarter in the export-driven nation.

This added to pressure for market correction from bullish trend in 2017 that lifted Kospi by 21.8 percent, from 2,026.46 to 2,467.19. It was the sharpest rise in seven years since a 21.9 percent surge in 2010.

Moreover, such downside factors are likely to persist in the second half of this year, analysts noted. From end-June until Friday, Kospi slid 1.6 percent.

“It is still hard to extend an optimistic outlook for Korean stock market at this moment,” wrote Ha In-hwan, an analyst at SK Securities, in a note Monday. “The market has yet to steer clear of issues related to trade conflict between the US and China.”

Ha also pointed to lackluster performance of Chinese stock market, possibilities of foreign capital flight following a stronger dollar against the Korean won and negative retail investors sentiment.

Another analyst, Kim Young-hwan at KB Securities, said impact from US sanctions against Chinese goods has yet to be fully gone effective. While US tariffs on $34 billion goods will be counted in Korean firms’ earnings data from July, a second batch of US tariffs on $200 billion goods will deal another blow to the market starting September, according to Kim’s estimate.

“A consensus for Kospi-listed companies’ earnings has started to decline since June, when trade conflict came to the fore,” he wrote in a note. “The problem is, outlook for revenue has yet to be downgraded, meaning the US-China trade conflict issue has not been reflected on earnings projection yet.”

By Son Ji-hyoung 
(consnow@heraldcorp.com)