Kospi’s record run could continue to year-end

Despite dark clouds over the performance of South Korea’s stock market this year, the main bourse Kospi is bucking the regional trend and appears to be recovering quickly.

It is now largely driven by the subdued virus impact here, quantitative easing policies around the world and hopes for COVID-19 vaccines.

Local stock brokers even predicted that the recent market rally would continue until the end of 2020.

Hyundai Motor Investment Securities is one of the brokerage firms that have painted the most optimistic pictures.

“Most of the time, the Kospi hit an all-time high within 38 months after the past financial crises,” said Kim Joong-won, an analyst from the brokerage firm.

“The bourse will be able to set a new all-time high by end of this year, which will mark approximately the third year since the index hit a previous record high.”

The Kospi set the record high of 2598.2 points on Jan. 29 2018.

The analyst cited the above-par economic growth despite the coronavirus impact as a reason for his upbeat outlook. The nation is forecast to boast the lowest decline in its growth rate among OECD member nations this year.

Economic indicators in the US, including the purchasing managers’ index and consumer sentiment, also showed that the US economy is now on a recovery path, Kim explained.

KB Securities analyst Lee Eun-taek said the speed of economic recovery might be faster than many economists have suggested. The number of second-quarter earnings surprises and confidence building over economic recovery is likely to further vitalize the local stock market.

“Forecasts on the real economy may have been too conservative compared to earnings surprises in the second quarter,” said the KB Securities analyst.

The stock market has been on a bullish trend, mainly driven by tech companies and emerging alternative energy firms, like battery manufacturers. As expectations of a global economic recovery rise, coupled with the development of the vaccines, stocks of retail companies have been rallying in recent weeks.

Some analysts, however, said that natural corrections along the way are inevitable as stocks have been surging at a rapid pace.

“Two out of every 10 large-caps are thought to have entered an overheating phase,” said Lee Jin-woo, an analyst from Meritz Securities, in a recent report.

The Kospi index reached a high of 2,458.17 points in intraday trading Thursday, extending gains to the ninth straight session. It fluctuated just before the market’s close, but ended up 5.18 points, or 0.21 percent.

By Kim Young-won (wone0102@heraldcorp.com)