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Analysts predict Kospi upturn

Foreign investors come back to the market after net selling for 33 straight trading days

July 25,2008
The Kospi jumps to 1,626.14 after foreigners turn net purchasers yesterday. Above, children listen to an explanation of the stock market on a visit to the Korea Exchange in Yeouido. [YONHAP]
Is the bearish local market seeing the light at the end of the tunnel?

Foreign investors snapped their selling spree of 33 straight trading days yesterday, and the benchmark Kospi surged over the 1,600-point mark for the first time in three weeks. The index gained 34.38 points, or 2.2 percent, closing at 1,626.14 points.

Foreigners bought 180.5 billion won ($179.2 million) worth more shares than they sold in the day. Over the past 33 days through Wednesday, they net sold 9 trillion won worth shares.

Over the past week, the index rose more than 100 points.

Analysts say it is not an indication of that a full-fledged recovery has begun, but many agree the Kospi could enjoy an upward trend for the time being.

Park Suk-hyun, an analyst at Eugene Investment and Securities, said a short-covering rally by
foreigners began.

“Foreigners did most of their short selling in the 1,600-1,700 point range, and today’s foreign buying is interpreted that they are shifting to a short-covering stance,” Park said.

Selling short means the investor borrows shares from a broker and sells them with the expectation that the stock prices are going to fall. Covering short means that short seller takes profits by covering his or her position.

Park said his claim is backed by the fact that shipbuilders and builders were the shares most favored by foreigners yesterday. Shipbuilders and builders were the firms they most frequently sold short previously. Park said the index could rise to 1,700 points.

Min Sang-il, an analyst at Hanwha Securities, said it is too early to say foreigners have begun to short-cover.

But, he shared the view the Kospi is in for an upward trend.

Min said a full-paced recovery will begin in September at the earliest if the distress in the U.S. financial market eases and stabilizing oil prices are confirmed to be long-lasting.


By Moon Gwang-lip Staff Reporter[joe@joongang.co.kr]





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