Market Is Poised To Make Run at 600

Following a four-day winning streak last week, the local stock market is expected to test the 600-point level in the week ahead amid improving market conditions, analysts said.

Last week, the benchmark Korea Composite Stock Price Index, or Kospi, gained 5.2 percent to 585.60, while the Kosdaq index jumped 6.9 percent to 80.48.

The major driving force behind last week's rally was the so-called yellow chips, or medium-priced blue chips with sound fundamentals, with foreign investors shifting to those stock from large-caps, their long-time favorites. They reached their investment limits in SK Telecom Co. and Korea Telecom Corp. Meanwhile, their holdings in Samsung Electronics Co. is also at a record level.

Analysts said that the Kospi may take a break to consolidate following the ascent, meeting a wall of selling between 580 and 600. Still, they said, the index would attempt to rise further, albeit slowly, helped by favorable conditions in the local equity markets and a possible interest-rate cut in the United States.

There are mounting expectations of an additional rate cut by the U.S. Federal Reserve Board, which is scheduled to meet on May 15.

On Friday, New York stock markets opened sharply lower following the release of a weaker-than-expected April jobs report. The report shows the U.S. unemployment rate had risen to 4.5 percent, a 30-month high, raising more fears about a slowing U.S. economy.

However, Wall Street turned back into positive territory on optimism that such a high jobless rate would prompt the Fed to lower interest rates by half a percentage point, helping boost the economy. Also fueling bullish sentiment, the U.S. economy grew an unexpectedly strong 2 percent in the first quarter.

"The higher-than-expected GDP growth raises the possibility of a slow recovery in the U.S. economy," said Kim Joong-hyun, an analyst at Good Morning Securities Co. "Given that the United States accounts for about 20 percent of Korea's exports, a stronger U.S. economy would raise the chance that the domestic economy will recover in the second half."

Domestic factors are also improving. The Japanese yen recouped some of its value, and the won strengthened to the 1,290-won level against the U.S. dollar. The yield on the benchmark three-year government bonds fell to 6.45 percent Friday, compared with 6.93 percent on April 26.

by Kim Hyun-chul