Korea’s KOSPI Index, which posted its biggest monthly decline in two years last month, had its mid-year target cut at Citigroup Inc. on concern higher oil prices will hurt corporate profits.
The mid-year estimate for the benchmark stock gauge was reduced to 2,050-2,150 from 2,200-2,300, Citigroup analysts led by Michael Chung wrote in a report dated yesterday.
The brokerage increased its Brent crude estimate to $105 for 2011 from $90 a barrel, the report said.
“We believe most major companies in Korea are able to deal with oil prices up to $100, but beyond that, they start to suffer on margins,” the analysts wrote. Analysts will eventually lower their earnings forecasts by 6 percent to 7 percent on average, they said.
The KOSPI fell 6.3 percent last month, the biggest drop since February 2009, on speculation accelerating inflation will boost borrowing costs and turmoil in the Middle East will hurt companies with sales in the region. The gauge’s companies are valued at an average 10.1 times this year’s profit, the lowest in Asia after Pakistan’s index.
(Bloomberg)
