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Spunky Kospi is startling analysts

May 31,2007
UBS AG and Macquarie Securities Ltd. said Korea’s benchmark Kospi index will rise more than they had previously estimated this year, citing improved corporate governance, takeovers and a positive economic outlook.
The Kospi may climb to 1,850 by the end of the year after the index rose above the previous estimate of 1,650, UBS said in a report to clients yesterday. Macquarie lifted its year-end estimate to 1,790 from 1,625 in a separate report.
The Kospi index has gained 15 percent this year, compared with a 4.4 percent increase in 2006, when it was Asia’s second-worst performing market. Demand from China has helped propel industries such as shipbuilding and machinery, while an influx of money from overseas investors has also helped drive up stocks.
“More companies are transforming into a holding company structure,” and “there are still a good list of companies that the government agencies and banks plan to sell,” wrote Young Chang and Edward Yoon, Seoul-based analysts at UBS.
SK Corp., Korea’s largest oil refiner, and Kumho Industrial Co., the country’s biggest builder by sales, are UBS’s “top picks” for their plans to reorganize into holding companies. The brokerage also recommended Daewoo Shipbuilding & Marine Engineering Co., the world’s third-largest maker of ships, after several firms expressed interest in buying it.
Macquarie suggested investors buy shares in construction, shipbuilding and banks in the second half. It added Binggrae Co., a snack and beverage maker, and Yuhan Corp., Korea’s biggest drugmaker by market value, to its model portfolio.
Domestic demand will show “sustained growth,” while consumer sentiment is improving, the brokerage said.


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