At Kospi, happy days are here again

A board at Korea Exchange Bank (KEB) in central Seoul shows the Kospi closing at 2,053.01. The Seoul main bourse exceeded the 2,050 mark for the first time in more than two years last Friday. [NEWSIS]

The Seoul main bourse once again hit its highest mark in more than two years as the Kospi inched up to close at 2,053.01 yesterday.

The first time the benchmark Kospi reached the 2,050 mark was on Friday after it gained 0.58 percent from the previous day to close at 2,052.4. Now investors are wondering if the bullish rally will continue. There is a saying that the stock market rises on doubt and slides on hope.

For now, many market watchers say the current momentum will likely continue and could easily push the market up to 2,080 or 2,100.

The current momentum is largely the result of a lengthy buying spree by foreign investors.

While institutional investors have been off-loading shares, foreign investors have been loading up their portfolios for 37 consecutive trading days. The buying spree that started on Aug. 23 is the longest streak ever, breaking the previous record of 34 days in 1998.

Last week alone, foreign investors were net purchasers of 1.3 trillion won ($1.2 billion). Accumulated stock purchases by foreign investors since August exceeded 13 trillion won.

Market analysts say that unlike the late 1990s, current investments are based on optimism over Korea’s economic improvement.

“In 1998, foreign investors bought local shares because they were cheap, but what we’re seeing today is that they’re buying shares even though the index is over 2,000, which means they are optimistic about the future of the Korean economy,” said Oh Sung-jin, an official at Hyundai Securities.

Although the central bank has lowered its outlook for next year to 2.8 percent from 3 percent due to concerns about a slowing global economy, there is not only strong faith in the Korean economy’s fundamentals, including the continuing current-account surplus, but also in improving global trade.

Last Friday, data showed China’s gross domestic product growing 7.8 percent in the third quarter compared with the previous year. It was the fastest growth that the world’s largest market has seen this year.

Although there are doubts about whether China can continue its expansion with exports posting an unexpected decline, and industrial outlook and retail sales decelerating, the third quarter expansion was welcome news from Korea’s biggest trading partner.

Korea wasn’t the only economy that responded to China’s GDP growth, as other export-oriented economies like Taiwan, Canada and Australia gained ground in recent weeks.

“Last week, the Canadian stock market reached its highest point in more than two years,” said Park So-yeon, an analyst for Korea Investment Securities. “Like Korea, its economy is sensitive to the external environment as it is very dependent on exports.”

In fact, foreign investors have been centering their purchases on major export goods such as semiconductors, steel, automobiles, telecommunications, chemicals, shipbuilding, machinery and software.

Even when compared to other Asian markets, the yield on Korean stocks was relatively higher. Other than India or Thailand, whose yield was 1.7 percent and 1.8 percent last week, Korea’s yield at 1.4 percent was higher than that of Taiwan’s 1.1 percent or Indonesia’s 0.6 percent.

The deal averting default in the United States and the likelihood that the Fed’s bond-purchasing program will continue for the near future have also led foreign investors to increase their “buy Korea” momentum.

“We continue to find a number of Korean stocks that we find attractive,” said Peter Wilmshurst, executive vice president at Franklin Templeton Investments. “There does seem to be good reason from global investors to invest in Korea.”

He also noted a trend of investment interest in global equities.

“From a regional perspective, Europe is a clear area that looks to be the most undervalued and with the most opportunities, and the United States is clearly second in that regard,” he said. “We’re also finding opportunities in Asia, and Korea is one of the markets in which we have a number of investments.”

In the meantime, a report yesterday showed that the bullish stock market has led the total amount of market price of Korea’s top 10 conglomerates to increase.

According to the Korea Exchange, the total market price of the country’s 10 largest conglomerates reached 750.07 trillion won as of last Wednesday, which is 1.63 percent higher than the end of last year’s 738.06 trillion won.

By conglomerate, the market price of Hyundai Heavy Industries shares rose 18.4 percent during the period from 21.5 trillion won to 25.4 trillion won as foreigners expanded their investments in the shipbuilding sector.

The market price of SK Group increased 16.24 percent and Hyundai Motor Group 11.07 percent.

BY Lee Eun-Joo, Lee Ho-Jeong [angie@joongang.co.kr]