South Korean stocks will likely move in positive terrain this week, backed by a solid foreign inflow, although momentum will be capped by uncertainties stemming from the U.S. monetary policy, analysts said Sunday.
The benchmark Korea Composite Stock Price Index closed at 2,005.58 on Tuesday, up 2.57 percent from the previous week. The main bourse was closed for the rest of the week for the three-day Chuseok holiday. Chuseok is the Korean version of American Thanksgiving.
The KOSPI had rallied in the past few sessions on the back of a strong foreign buying but capped its bullish binge, taking a wary approach ahead of the U.S. Federal Open Market Committee meeting on Sept. 18 U.S. time.
On the contrary to market anticipations, the U.S. central bank said it will retain its monthly $85 billion bond-buying program for the time being as the world’s No. 1 economy is recovering at a slower pace than expected.
The Fed’s decision to hold off the stimulus cut sparked rallies in other Asian markets, with some of the emerging countries, which were feared to suffer the most from the tapering, to surge up to 5 percent in a day.
The Dow Jones industrial average rose to a fresh high right after the Fed’s announcement.
But analysts forecast that the Seoul bourse won’t likely see another momentum from the “Fed effect” since the FOMC has only put off its call until later.
“It may push up the KOSPI for a short while but the Fed impact on the local market will be neutral as uncertainties as to when it’ll start unwinding the stimulus remain,” said Yoo Seung-min, an analyst at Samsung Securities Co.
Analysts predicted that the undervaluation of local stocks would draw investor sentiment from abroad, possibly lending support to extending the recent streak of foreign buying.
Foreigners have scooped up a net 4.7 trillion won ($4.33 billion) worth of local equities in the last seven trading days, continuing a buying spree for the 18th consecutive session since Aug. 23. (Yonhap News)
