Analysts' Debate: Is the Worst Over?

As local share prices rallied for a second straight day Thursday, analysts expect the rapid surge to slow down, but predict that the upward trend will continue for about a month because first-quarter earnings reports released by major U.S. corporations do not look as bad as expected, stirring hopes for an economic recovery.

Wednesday's surprise interest-rate cut by the U.S. Federal Reserve Board may trigger more Wall Street rises, and the Fed may trim its key rates further at its meeting slated for May 19, analysts said. But many are cautious about predicting that stock prices will take off in earnest.

The prevailing view among analysts is that the Korea Composite Stock Price Index reach the 620-point level next month because, they say, the three most important factors - the won-dollar exchange rate, U.S. interest rates and corporate earnings performance - are improving.

"Most negative factors are disappearing," said Kim Ji-young, an analyst at Samsung Securities Co., "as the won's value is hovering around 1,300 to the dollar and investors expect a further rate cut in the United States. Corporate earnings are also expected to improve."

But experts are divided over the long-term trend. Some predict that both the U.S. and Korean stock markets will attempt a further rise; others say it is too early for safe predictions. "There is no clear sign of an economic recovery in the United States," said Lee Jong-woo, senior analyst at Daewoo Securities Co. "The Fed's surprise rate cut only proves that the U.S. economy is in trouble." He expects the local benchmark index to hover around 600.

by Rah Hyeon-chul