Stock rally to slow in May: analysts
But analysts advise them not to hope for too much, as the rapid ascent since March may leave the markets gasping, while the swine flu scare will have an unpredictable effect on global stocks.
Many analysts said May would be good time to snap up more technology, energy and retail shares, which will receive boosts from economic stimulus projects in Korea and abroad, especially in China.
“The rally toward the 1,400-point mark will continue, but we probably won’t see the brisk gains we saw in March and April since the market has risen so fast in such a short period of time so far,” said Park Hyo-jin, a market analyst at Goodmorning Shinhan Securities.
Korea’s benchmark Kospi, after breaking out of months of stagnation, has climbed more than 25 percent since the beginning of March, while the tech-heavy junior Kosdaq soared 36 percent during the same period.
The Kospi yesterday spiked by 38.18 percent to close at 1,338.42, while the Kosdaq surged by 15.1 percent to 494.47, a day after both markets were hit hard by intensifying worries over swine flu.
Better-than-expected first-quarter earnings at major Korean companies, coupled with the unexpected rise in GDP in the first quarter, certainly buoyed market sentiment this month.
But the figures were not strong enough to convince investors that the economy has fully extricated itself from the economic meltdown or that there was sustainable upward momentum on the stock markets, said Park. He predicted the Kospi would hover between 1,300 and 1,420 next month.
“The May stock market will be a time for retrospection by some investors to assess the markets’ gains so far,” said Lee Young-won, an analyst at Prudential Investment and Securities, predicting the Kospi would fluctuate between 1,250 and 1,400 over the next month.
The U.S. government’s series of plans to stabilize the ailing financial industry will soon kick into high gear, meaning industry observers will have to decide whether their expectations for the government’s rescue plans, which helped boost stocks in recent months, have been justified.
“There could be more negative repercussions if more unexpected news about swine flu comes out and deals a blow to the economy,” he said.
Kim Joo-hyung, chief investment strategist at Tong Yang Securities, also counseled caution over the brewing uncertainty on the U.S. financial markets, saying the results of the bank stress tests by the U.S. government are likely to dictate the direction of global markets in the days ahead.
But he said there are signs that the country’s consumption may perk up on the heels of new tax benefits aimed to bolster the economy, while the country’s ISM manufacturing index, a major gauge of manufacturing activities, has climbed for three months in a row.
“The recovery in consumption due to the tax breaks may provide more momentum to Korean exporters as well,” said Kim, predicting the Kospi is likely to dance around the 1,250- to 1,460-mark next month. He also advised investors to pick shares of electronics and car firms, which are likely to enjoy greater demand in China.
“The Chinese government’s tax breaks and state subsidies for rural residents buying cars and electronics will help strengthen Korean electronics and carmakers, whose shares of the Chinese markets are expanding rapidly,” Kim explained.
By Jung Ha-won [hawon@joongang.co.kr]
with the Korea JoongAng Daily
To write comments, please log in to one of the accounts.
Standards Board Policy (0/250자)