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KOSPI to reach 3,000 points next year: Nomura

2018/07/12 15:10

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SEOUL, July 12 (Yonhap) -- South Korea's benchmark stock index is forecast to surpass 3,000 points next year if corporate governance and corporate policies on returns for shareholders are improved, Nomura Financial Investment Co. said Thursday.

The brokerage firm previously expected the benchmark KOSPI to break the level this year, citing solid growth of corporate earnings and the restructuring of corporate governance.

But it has now lowered the target to 2,600 due to "concerns over the memory sector entering inflection periods in the second half, slower-than-expected corporate governance and shareholder return policies and lower earnings growth forecast," Nomura expert Chung Chang-won said.

After bullish trade last year, the KOSPI surged to a record high of 2,607.10 on Jan. 29 but has been under downward pressure amid a mixture of shaky external circumstances and weaker growth momentum. On Wednesday, the KOSPI finished at 2,280.62.

"However, we remain positive for the longer run and expect the index to re-rate toward 3,000 points next year if the aforementioned negative factors make a turnaround," Chung said.

The memory sector will experience increased volatility this year, though bio and pharmaceuticals are expected to be bullish, he noted.

Touching on trade protectionism moves by the United States, Nomura said the trade friction will have limited direct impact on the South Korean gross domestic product.

"Higher tariffs themselves will not have such a big impact on the final demand, though the subsequent uncertainties could negatively affect both corporate and consumer confidence," Kwon Yong-sun, another Nomura expert, said.

Nomura set the country's growth forecast for this year at 3.0 percent and that for 2019 at 2.7 percent, saying that after reaching a peak, the global as well as the South Korean economy has shown signs of a slowdown.

"The increase in the minimum wage sparked the restructuring of particularly self-employed businesses, which caused jobless growth," Kwon said, stressing the need for sophisticated fiscal policy measures.

South Korea raised the hourly minimum wage by 16.4 percent in January, the biggest hike in nearly two decades.

He, however, dismissed concerns over capital outflows in case of more than a 1 percentage point gap in the interest rate between the United States and South Korea, noting that "profits foreign investors could earn over the course of hedging could attract foreign investors to the local market such as for bond transactions."

   Last month, the U.S. central bank raised its benchmark fund rate to between 1.75 percent and 2 percent and signaled two more rate increases by the end of this year. On Thursday, the South Korean central bank decided to keep the base rate unchanged at 1.5 percent.

graceoh@yna.co.kr

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