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(News Focus) KOSPI reclaims 2,000-level on strong foreign buying

All Headlines 15:48 December 14, 2010

SEOUL, Dec. 14 (Yonhap) -- South Korea's key stock index again reached the 2,000-point milestone on strong foreign buying on Tuesday, prompting analysts to predict it will advance further and hit an all-time high in the coming year.

The benchmark Korea Composite Stock Price Index (KOSPI) advanced 12.46 points to finish at 2,009.05, rising 0.62 percent from the previous session and closing above the 2,000 mark for the first time since late 2007.

The market turnaround came after the KOSPI peaked at an all-time high of 2,064.85 on Oct. 31, 2007 only to fall back below the 1,000 point the next year as the global financial crisis, triggered by the collapse of Lehman Brothers, wreaked havoc on the world and local financial markets.

The recent market rally is widely attributed to continued stock buying by foreign investors who are betting on emerging economies that have pulled out of the global crisis at a faster pace than their advanced peers.

Overseas investors have bought a net 19.4 trillion won (US$17 billion) of KOSPI shares so far this year with institutional and retail investors selling a net 10.5 trillion won and 5.3 trillion won each, according to the bourse operator Korea Exchange.

Analysts said the local currency's uptrend has helped boost the allure of local stocks for foreigners since the value of won-denominated share holdings climbs as the Korean currency ascends against the U.S. dollar and other major global currencies.

"The Korean market is still deemed attractive (even after recent big gains), given the pattern that foreign investors usually search for returns from currency movements," Hyundai Securities analyst Bae Sung-young said.

After strengthening about 3.4 percent to an average 1,128.08 won to the U.S. dollar as of November, since the start of the year, the Korean won is expected to further strengthen to 1,050 won to the greenback next year, according to Morgan Stanley.

Experts also attributed the KOSPI's solid performance to listed companies' strong profits, mostly seen among tech companies, auto makers and chemicals producers, which have all been powerful exporters throughout this year.

"Corporate profits sharply improved in quality and size to a level incomparable with the past after local firms have boosted global competitiveness since the financial crisis," said Kim Sang-cheol, an analyst at Schroders Korea.

Analysts paint a rosy picture of the KOSPI's performance down the road.

Given KOSPI-listed firms' outperforming profits, the index is still undervalued and will likely further extend its gains well into next year to reach a new record peak as high as in the mid-2,000 range, they forecast.

"Their operating profits grew to some 100 trillion won from the 60-70 trillion won range in 2007," said Hwang Kum-dan, an analyst at Samsung Securities.

"Given the surge in corporate profits, the key index will gain further ground, also possibly shored up by still-low interest rates and ample liquidity."

Experts said the expected bull run of the local stock market is not likely to be deterred by external uncertainties such as growing tensions on the Korean Peninsula, a slumping U.S. economy, Europe's fiscal crisis and China's monetary tightening.

"The local equity market was little affected when North Korea launched last month its first attack on the South's soil in 60 years," said Hur Nam-kwon, an analyst at Shinyoung Asset Management, referring to the communist country's shelling of an island near the sea border with the North.

The attack killed two marines and two other civilians while leaving many others wounded.

"The strong resistance resulted from a low valuation of local shares and the market is most likely to shatter internal and external obstacles to extend its gains," Hur said.


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