Bailout sees Kospi edge past 1,900

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Bailout sees Kospi edge past 1,900

Korean stocks rose 1.46 percent yesterday as investors were buoyed by a set of bailout measures agreed on by European policy makers and financial institutions. The local currency shot up against the U.S. dollar.

The benchmark Kospi soared 27.73 points to reach 1,922.04, exceeding the 1,900 mark for the first time since Aug. 5. “Market watchers are split on the Europe move since it is short on specifics. However, it laid out a large framework that will likely help the region move closer to resolving its spiraling debt problems,” said Kwak Joong-bo, an analyst at Samsung Securities.

European leaders agreed to lower Greece’s debt burden by 50 percent and set up plans to scale up the region’s rescue fund as well as recapitalize European banks. The details of the deal are set to be finalized later this year.

“While retail investors are locking in profits from the gain, institutions, especially pensions, are beefing up their purchases, which is a good sign,” Kwak said, adding that the upward momentum is expected to continue in the short term.

With the Kospi breaking the 1,900 mark after tiptoeing close several times this week, analysts rolled out mixed forecasts on whether yesterday’s session signals the beginning of a relief rally or just a brief respite from declines.

“The index has been rising as the European sovereign debt crisis shows signs of calming, beginning with the expansion of the European Financial Stability Facility, while data suggests that the U.S. economy is not heading into a double-dip [recession],” CEO of Samsung Investment Trust Management Kim Suk told the JoongAng Ilbo, the mother paper of the Korea JoongAng Daily.

“[However] it’s hard to view it as a strong rally,” he said, adding that the U.S. and Chinese economies may still see slowdowns and stocks could move sharply on the news of further sovereign credit rating downgrades on European countries or banks.

Others took a more upbeat view.

“There are incremental solutions being presented to the European crisis, while the world economy has stepped away from the threat of another recession,” said Choi Seok-won, the head of research at Hanwha Securities. “The [Kospi’s] rally is expected to last until the first quarter of next year.”

With multiple analysts forecasting the Kospi could reach 2,000 points before the end of the year, experts said stocks may prove the most promising investment.

By Lee Jung-yoon, Yonhap []

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