Financial indices gaining momentum on Iran deal

South Korean stocks and currency are making a strong showing after Iran reached a provisional nuclear deal with the United States and several major economies on April 2.

Financial market insiders share the view that their favorable performance is attributable to eased worries over the recent bounce-back of international oil prices ― as high prices usually undermine both industries and private consumer sentiment.

The KOSPI surpassed 2,050 points for the first time this year during the Monday session. The benchmark stock index climbed by 17.98 points compared to 2,028.45 on April 1, to close at 2,046.43.

Stocks in sectors like construction and shipbuilding led the rally. Hyundai Engineering & Construction rose 8.07 percent over the earlier trading session from 50,800 won to 54,900 won per share.

The U.S. dollar has continued to slide against the won for the fourth trading session. The greenback, which dipped to below 1,100 won on April 2 ― when the Iran-U.S. deal was struck ― further weakened to close at 1,084.8 won on Monday.

The won-dollar exchange rate was at its lowest level in about two months since it was traded at 1,084.1 won on Feb. 4. This year, it peaked at 1,131.50 won on March 16.

Analysts said the dollar’s weak position was due to the U.S.’ lackluster employment index, which may delay the Federal Reserve’s interest rate hike.

“Bourses of emerging markets (including Korea) will likely continue their strong positions amid the slower-than-expected exit strategy of global investors who will again focus on risky (high-yield) assets in emerging markets,” said NH Investment & Securities.

Hyundai Futures research analyst Lee Dae-ho said, “The Iran deal is propelling the sentiment for risky assets.”

Market participants appear to be taking a wait-and-see stance over oil prices amid split projections on future prices. Some forecast a sharp drop to $30 a barrel while others say it would surge to $70-80 barrel eventually in the coming months.

Investors in the Korean market are betting on a midterm drop in prices after the Iran deal. S-Oil fell by 2.38 percent, or 1,600 won, from the previous trading session to close at 65,600 won per share.

The state-run Korea Development Institute, in its Monday report on the economy, said that facility and construction investment have picked up from the recent doldrums.

Low oil prices, which were estimated to hit the bottom between January and February, and a benchmark rate cut in March are exerting a positive impact on the economy as a whole, it said.

“Indices for manufacturing remain sluggish, yet the economic activity index is improving, with consumption and facility investment all on the mend as of February.”

Though construction investment moved up in February, the slow pace of global economic recovery hurt overseas shipments, a core growth engine for the export-driven nation, the KDI data showed.

By Kim Yon-se (kys@heraldcorp.com)