High global liquidity would help Kospi escape ‘Boxpi’ in 2017: expert

Backed by expanding fiscal spending in advanced economies, global investors are highly likely to hunt for riskier assets that would boost stock markets around the world next year, said a securities brokerage firm based in Seoul.

Hanwha Investment & Securities forecast the global economy would have a modest but stable growth next year due to huge investments in infrastructure and fiscal spending by governments, despite high political uncertainties remaining in many parts of the world.

“At least, there will be no economy showing negative growth rates next year,” said Ma Joo-ok, head of research at the securities brokerage at a briefing on Tuesday. 

The US economy, in particular, is estimated to grow more than 2 percent in 2017, helped by recovering investments, the brokerage said.

On the other hand, the Korean economy is expected to suffer weaker household consumption stemming from aggravating burdens of debt repayment, shrinking labor market and increasing pressures on trade from the US.

“Since the global economy is on the recovery track, investors will prefer stocks over bonds, especially stocks in emerging economies,” Ma said. “Those who still seek bonds would better choose emerging market bonds, but should be aware of potential capital outflows.”

The chief researcher judged the likelihood for the US Federal Reserve to hike fund rates is “very high.”

“After an increase in December, we forecast that the Fed would make three more hikes to 1.5 percent by the end of next year,” Ma said.

Including the US rate hikes, conditions surrounding the Korean stock market are not favorable, but the country’s main stock trading board Kospi is at least predicted to escape a “Boxpi” scenario, referring to the Kospi staying in the 1,800 to 2,200 range since 2011. 

“Increased global liquidity is likely to help the Kospi exceed the range next year, up to 2,314 points,” the researcher said.

By Song Su-hyun (song@heraldcorp.com)