Kospi, Kosdaq defy Greece fears

Despite earlier concerns that uncertainties from the Greek debt crisis would force foreign investors to pull out of the Korean stock markets, the benchmark Kospi and Kosdaq have enjoyed an upswing the last three days.

In fact, the nation’s benchmark Kospi closed above 2,100 for the first time since June 1.

Other than Monday, when the main bourse tumbled 1.42 percent amid news that Greece once again faced default, the Kospi has been enjoying a three-day upswing. The main bourse is now up 2 percent from Monday.

The tech-heavy junior market Kosdaq saw an even sharper increase, growing more than 4.6 percent during the same period. On Thursday, the Kosdaq closed at its highest point in nearly eight years, adding more than 1 percent to close at 768.67. The last time the Kosdaq was this high was on Nov. 11, 2007 - about a year before the global financial crisis - when it closed at 779.04.

The movement came as a surprise because it was a stark contrast to 2011. After the first crisis in southern Europe and Greece broke out, European investors sold their investments in emerging markets, including Korea. That year, European investors sold off 15 trillion won in stocks from the Korean stock markets.

This time, there’s yet to be a major sell-off by foreign investors. In fact, foreign investors were net buyers on the Kospi, though they net sold on the Kosdaq on Thursday.

The recent upswing in the stock market is not limited to Korea. Global equity markets, including the New York Stock Exchange and Nasdaq, rose overnight. Most global markets were up, except for in China.

Market analysts say the current trend has to do with optimism that the Greek situation will not end up at its worst. Many analysts are hopeful, especially since the Greek government is showing signs it will accept conditions proposed by creditors.

“The market will likely continue on an upswing as related concerns have been easing amid growing expectations that the negotiation between Greece and its creditors will reach an agreement,” said Kim Jung-hyun, an analyst at IBK Investment & Securities. “The Greek situation will likely to continue to create noise, but the impact it has on the market is expected to be limited.”

The Greek crisis is causing less of a scare than it did four years ago in part because its debt is mostly borrowed from the International Monetary Fund, European Central Bank and the European Financial Stability Facility. In the past, most was borrowed from the private sector. As a result, the threat Greece poses to the European financial industry is expected to be limited.

Analyst also say that the depreciation of the Korean currency against the greenback is also helping lift the markets.

“The won is expected to depreciate further against the greenback,” Ma Ju-ok, an analyst at Kiwoom Securities, wrote in a report on Thursday, “as the U.S. economic indices are enhanced and the uncertainty of Greece crisis is still expected to remain, although most analysts agree that its impact on global equity market would be only limited.”

BY Lee HO-JEONG, KIM JI-YOON [kim.jiyoon@joongang.co.kr]