Election pushes Kospi to a brief record high
A monitor at KEB Hana Bank’s headquarters in Seoul shows the Kospi trading above the 2,300 level for the first time in its history on Wednesday morning. [YONHAP]
By the end of the day, however, the market closed 22.64 points or 0.99 percent lower than the previous trading day, which was Monday, at 2,270.12. (The market was closed Tuesday, Election Day.) Wednesday’s drop was largely seen as a temporary adjustment as investors collected profits from the recent rally.
The market was certainly relieved at an end to a power vacuum that was created when President Park Geun-hye was removed from office in March. And there seemed to be growing confidence in the new liberal administration, the first in a decade.
Just 30 minutes into trading, the Kospi rose to 2,323.22, which raised expectations that the index could reach the 2,500 level this year.
“We predict the index to go as high as 2,350 within this month,” said Yoon Young-kyo, a strategist with Cape Investment & Securities, adding that the Kospi has been rising at a faster rate than predicted thanks to the easing uncertainties at both home and abroad, along with better-than-expected performances by Korean companies.
Moody’s, the global credit ratings agency, also said the election eased uncertainties in the country.
“The election of Moon Jae-in as new Korean president clears uncertainty that may have arisen from the political transition,” said Steffen Dyck, senior credit officer at Moody’s. “We maintain our view that the probability of a military conflict with North Korea remains very low, although it has increased somewhat in recent months. Geopolitical tensions continue to pose the most salient event risk for Korea and are a key constraint on the sovereign’s credit profile.”
Hanwha Investment & Securities said in a report released Wednesday that it is raising its prediction for the index from the 2,300 level to the 2,500 level as the company believes the market is still undervalued. “There is a high potential for the index to go up further from now on and we predict the index to hit 2,470 to 2,580 by the end of this year,” the report said.
Some analysts argued that it is not just the Kospi that has seen improvements recently.
“Not only Korean shares but also other emerging markets’ indexes are going up as many investors are rushing for non-dollar assets as it is expected that the value of the U.S. dollar will weaken,” said Lee Eun-taek, a strategist at KB Financial Group. The U.S. currency is expected to weaken as the Donald Trump administration wants to boost U.S. exports. This is leading to stronger currencies in emerging markets.
BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]
with the Korea JoongAng Daily
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