Kospi hits 2020 highs, next stop 2,500, brokers say
Stocks hit their 2020 highs Tuesday on abundant liquidity and hopes for an economic recovery.
Indications that governments globally will take measures to boost their economies and better-than-expected second quarter earnings from domestic companies were also factors in the market's rally.
The benchmark Kospi closed at 2,418.67 on Tuesday, up 1.35 percent. It was the seventh consecutive daily gain.
Not only did the Kospi hit its high of the year, but it closed above 2,400 for the first time since June 2018.
Korea stocks are now up 63 percent from the year's low, which was hit in March when the index touched 1457.64.
Retail investors net sold 174.6 billion won ($148 million) of stock on Tuesday in apparent profit-taking after net purchasing 2.3 trillion won this month through Monday. Foreign and institutional investors went on buying sprees, the former purchasing 146.6 billion won of stocks and the latter 39.7 billion won worth.
A quick V-shape recovery of Korea’s main index is raising some concern that a bubble is forming, but local analysts say there is still more room for it to go up.
“We can’t say the index has reached its peak considering better-than-expected earnings from Korean companies in the second quarter and also expectations of full recovery in the second half,” said Huh Jae-hwan, a researcher at Eugene Investment & Securities.
“It is true that some items are priced higher than they should be, but up through the 2,400 and 2,450 level, it would be hard to say there is a discrepancy between the index and company fundamentals.”
Brokerage houses in Korea have upped their Kospi forecasts for the year.
Korea Investment & Securities (KIS) recently revised its estimate from 2,370 to 2,480. Samsung Securities, Hana Financial Investment, Shinhan Investment and Eugene Investment are all calling 2,500.
More-than-enough liquidity in the market from retail investors is one of the main forces boosting the bourse. It also suggests that the trend will continue for a while longer.
According to the Korea Financial Investment Association (Kofia), investor deposits surpassed 50 trillion won this month, which is nearly a twofold increase from 28 trillion won in January. Credit loans made for stock investments reached an all-time high of 15.5 trillion won early this month.
“Considering the abundant liquidity for the stock market derived from a low base rate and regulations on real estate investment, it is likely that retail investors will take the main role in the market from now on,” said Lee Jae-sun, an analyst from Hana Financial Investment. "It could be momentum for the restructuring of Korea's stock market."
Samsung Electronics closed at 58,200 won on Tuesday, up 0.69 percent. LG Chem gained 5.28 percent to close at 758,000 won. Samsung Biologics rose by 4.28 percent to close at 804,000 won on an announcement that it is building a new factory in Korea.
Untact-themed stocks, such as Naver and Kakao, are losing steam. Naver lost 0.64 percent, while Kakao dropped by 0.98 percent.
Hyundai Motor performed well for a second consecutive day, jumping 5.29 percent jump on Tuesday. On Monday, it gained 15.65 percent.
The Kosdaq index closed at 860.23, down 0.29 percent. Retail investors net purchased 209.1 billion won worth, while foreign investors shed a net 38.6 billion won of stock and institutional investors unloaded 156.7 billion won worth of shares.
BY JIN EUN-SOO [email@example.com]
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