SEOUL, Jan. 24 (Yonhap) -- The South Korean stock market is projected to remain bearish this year as the country's low economic growth is feared to weigh down on investor sentiment, analysts said Thursday.
The gloomy outlook comes as the Bank of Korea has cut its 2013 growth outlook to 2.8 percent from 3.2 percent. Earlier in the day, the central bank announced South Korea's economic growth tumbled to a three-year low of 2 percent in 2012 amid a prolonged global economic slowdown.
Market watchers said last year's weak growth indicates that the country has already lapsed into a period of low growth, which comes as a major drag to the recovery of the local stock market.
"As there are no signs of a rebound in local companies' earnings, the stock market is expected to remain stagnant this year," said Kim Hyung-ryeol, an analyst at Kyobo Securities Co.
"Local firms maintained their competitiveness in exports amid the economic volatility last year on the weak won," he said. "This year, however, the won has been appreciating against the U.S. dollar amid slumping global demand (for South Korean products)."
A stronger won makes South Korean goods more expensive overseas, hurting the profitability of exporting companies.
I'M Investment & Securities Co. analyst Lee Jong-woo echoed such a view, saying that South Korean companies were reluctant to make facility investments last year due to the lack of profitability in the local market.
Facility investment contracted 2.8 percent on-year in the fourth quarter of last year after falling 4.8 percent three months earlier, and construction investment declined 1.3 percent, worsening from a 0.1 percent gain in the previous quarter, according to the central bank.
"A contraction in corporate investments will come as a major drag to the country's employment, income, and consumption," said Yoo Ik-sun, a researcher at Woori Investment & Securities Co.
Meanwhile, the benchmark Korea Composite Stock Price Index (KOSPI) finished at 1,964.48 on Thursday, down 0.8 percent, or 15.93 points, from the previous trading session.
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