Korean shares expected to rebound

The Korean stock market is expected to rebound as its fundamentals remain untouched despite increasing threats from North Korea.

Also, Korean shares will pick up after bearish trading last Friday on the Bank of Japan’s easy-money policy, as the country is set to follow up on its stimulus measures soon, analysts suggested.

“We expect to see share prices stay low in the beginning of the week and pick up towards the end of the week,” said Kwak Joong-bo, an analyst at Samsung Securities.

“The Bank of Korea will likely announce policies to bolster the economy this week.”

The benchmark KOSPI on Friday went through its biggest weekly fall since May of 2012 due to a massive selloff from foreign investors last week.

Analysts said the selloff was touched off by the depreciating Japanese yen and elevating tensions between the two Koreas.

“The market is facing multiple negative factors all at once. On top of North Korean threats that developed since December, the Bank of Japan announced aggressive monetary policies, making Korean shares look unattractive in comparison,” said Kwak of Samsung Securities.

On Friday, foreign investors, whose Korean equity shareholdings account for about 40 percent of market cap, net sold shares worth about 670 billion won ($592 million). This was the largest amount of such daily sales since October.

The KOSPI closed down 1.64 percent to 1927.23 points that day, with the index falling below the 1920 mark and dipping to as low as 1916.77 points during intraday trading.

The Bank of Japan on Friday unveiled radical plans to follow the U.S. footsteps to step up stimulus measures ― the new governor said the central bank would increase its purchase of long-term government bonds by 50 trillion yen annually, while also buying up trust funds and doubling the currency supply ― adding to fears of a depreciating yen, causing investors to turn away from Korea.

KDB Daewoo Securities analyst Han Chi-hwan assessed that the latest BOJ moves would be the strongest Japan could offer for now.

By Chung Joo-won (joowonc@heraldcorp.com)