Prognosis isn’t bright for markets this week

Korean shares will likely lose ground this week despite growing hopes of a solution for the European debt crisis as concerns over a U.S. economic slowdown will cause downward pressure, analysts said.

The benchmark Kospi closed at 1,769.65 on Friday, up 72.21 points or 4.25 percent from a week earlier. The index plunged to the year’s low of 1,652 on Monday amid growing concerns of a possible Greek default.

A sharp recovery was made the very next day when the index climbed 83 points or 5.02 percent on reports that Germany, Europe’s economic powerhouse, would soon approve an expansion of its fund to bail out Greece and other troubled European economies.

Germany approved the expansion of the EU bailout fund on Thursday, but without additional factors to cause upward pressure, the index remained virtually unchanged Friday, moving up only 0.02 percent from Thursday’s close at 1.769.29.

The upward movement of the Korean index was also helped by foreign investors, who turned to buying for the first time in four weeks.

Foreigners purchased a net 567.7 billion won ($481.5 million) worth of shares here last week, compared with net selling of 886.3 billion worth of shares the previous week.

The direction of local shares this week will largely depend on conditions in the United States, according to the analysts.

The United States on Friday reported the country’s personal income slid 0.1 percent on-month for the first time in nearly two years in August, sending jitters throughout the global market.

“The market’s attention that has long been focused on the European financial issue is expected to gradually shift to economic and market performances,” said Lee Seung-woo, an analyst at Daewoo Securities.

“Economic indicators set to be published early this month may have a negative impact on the market as they may reflect potential financial risks.”

Yonhap