Kospi rebounds on strong indicators

Korea’s stock market rebounded yesterday after five straight days of losses in a turnaround that was largely attributed to better-than-expected economic indexes in major economies like the United States, European Union and China.

The benchmark Kospi gained 1.14 percent yesterday, closing 21.04 points higher at 1,870.16 from the previous day. The index during trading even touched 1,876.14 as foreign investors returned as net buyers after two days of selling.

The gain in the local stock market was due to overnight indexes showing gradual recovery in the global economy.

Until yesterday, the Kospi had remained bearish amid growing fears of a third financial crisis in global markets if there is an exodus of foreign capital from emerging countries when the U.S. Fed begins to reduce its bond-buying stimulus program.

On Wednesday, stock markets across the globe were shaken by the release of minutes from the last Fed meeting that showed support for tapering this year.

U.S. Labor Department figures released Thursday showed jobless claims for the month ended Aug. 17 declined to 330,500 a week on average, the least since November 2007.

In the euro zone, a manufacturing gauge indicated expansion in August for the second straight month, according to London-based Markit Economic. A composite index covering services and factory output in all 17 countries using the euro also showed expansion for the second month.

The previous day, a report by HSBC showed China’s manufacturing index expanded this month after it had fallen to an 11-month low.

“Various indexes have confirmed that the global economy is on track for recovery, which revived investors’ sentiment,” said Lim Soo-kyun, a senior researcher at Samsung Securities. “The gain in the [Korean stock market] is significant in that the market was dominated mainly by economy-sensitive shares in the IT and shipbuilding sectors, which show a bullish trend only when there is hope in market recovery.”

It wasn’t only the Korean market that gained ground.

The Standard & Poor’s 500 Index gained 0.9 percent to 1,656.96 in New York, while the Dow Jones Industrial Average rose 66.19 points, or 0.4 percent, to 14,963.74, snapping a six-day losing streak that was its longest slump in 13 months. The Nasdaq Composite Index also rose 1.1 percent to 3,638.71.

“The employment numbers were encouraging and showed continuation of slow growth in employment,” said Paul Mangus, head of equity strategy and research for Wells Fargo Private Bank. “There are signs of stabilization in China and improvement in Europe, which could help U.S. multinationals in the long run.”

In Asia, Japan’s Topix index gained 2 percent to 1,141.63, halting three days of losses. It was also the biggest daily advance since Aug. 13, after Thursday’s closing at the lowest in eight weeks. Nikkei 225 jumped 2.2 percent to 13,660.55.

“The currency is showing that investors are moving away from their previous risk-averse positions, and that’s breeding a new sense of security in the equity markets,” said Naoki Fujiwara, Tokyo-based chief fund manager at Shinkin Asset Management. “If the Federal Reserve begins tapering amid global economic strength, then the markets are going to take it positively.”

Emerging-market stocks also rose after countries like India and Indonesia signaled they would take steps to support financial markets. The Jakarta Composite added 1.4 percent, the most in a month, after Coordinating Minister for the Economy Hatta Rajasa said in a speech yesterday in Jakarta a relaxation on mineral export quotas and a simpler investment-permit process. Thailand’s SET Index also climbed 0.4 percent, rebounding from an eight-month low.

“The fact that the U.S. and European recoveries are improving, albeit fractionally, is a good foundation for global markets,” said Matthew Sherwood, head of investment markets research in Sydney at Perpetual Investments.

“Markets are clearly in a transitional phase. Investors first have to get through the removal of the price distortions that quantitative easing created.”

BY LEE EUN-JOO, BLOOMBERG [angie@joongang.co.kr]