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| Dealers look at monitors at Hana Bank headquarters in central Seoul, Tuesday, as the benchmark KOSPI ended at 3,232.70 points, a 0.35 percent fall from the previous session. Foreign investors led the stock market index's fall on Tuesday, as they net sold 172.7 billion won ($150 million) worth of Korean stocks, while retail and institutional investors turn to net buying of the stocks. Yonhap |
Brisk corporate earnings to limit correction period
By Kim Yoo-chul
In tandem with the global stock market rally, both the KOSPI and Kosdaq have been enjoying very strong performances so far this year. The question is, will the country's equity market be able to keep its bullish momentum?
Valuations are rising and those of the top Korean exporters ― including Samsung, SK, LG and Hyundai affiliates ― are coming close to historically high prices. For this reason, some stock market experts are concerned about how high-value stocks are correlated to their entities' actual corporate earnings.
More importantly, because investors are searching for "good reasons," gauging the "right timing," or attempting to justify profit taking, the growing fear of the COVID-19 Delta variant could break the South Korean equity market's bullish run. Growing fears of inflation, a gradual tapering from the U.S. Federal Reserve and grim economic indices around the world will be received as the factors to awaken investors' appetites for profit-taking and to shake investors' faith in the global economy, analysts said, Tuesday.
The upcoming 2020 Tokyo Olympics are also considered another factor further chilling investor sentiment for foreign investors who have invested heavily in the country's tech-driven company stocks. Japan is the world's third-largest economy. However, only some 20 percent of its entire population is fully vaccinated, according to reports. If more Delta variant-positive cases are found during the Olympics, then the country's stock market will be pressured into further falls.
"Growing concerns over possible delay in the economic recovery, mostly because of the outbreak of the Delta variant, are cited as the primary reason for the recent falls on Wall Street. It seems likely investors will rush into profit taking for stocks that have risen sharply in the past few months," said Han Ji-young, an analyst at Kiwoom Securities.
Regarding the possibility that major foreign investors could rearrange their investment portfolios because of the "co-existence" in terms of inflation worries and the below-expected economic growth rate, a portfolio manager in Seoul said, "Korean stock markets will see some corrections. But the correction period shouldn't be much longer as there are likely to be brisk earnings reports from major companies in the United States and South Korea."
Foreign investors have a stronger preference for shares of Samsung, SK, LG and Hyundai Group because these conglomerates have global top-tier semiconductor, battery and vehicle-manufacturing affiliates under their wings. During a recent announcement of their preliminary earnings guidelines for the prior three months on June 30, Samsung Electronics and LG Electronics reported higher-than-expected earnings. Hyundai Motor and POSCO also forecast brisk earnings reports for the latest quarter, according to each company.
But the manager said he advised his clients to flee to bonds as a risk hedge. "Investors have greater worries that global economic recovery momentum could lose steam. But again, despite the spread of the Delta variant, the fundamentals of Korea's top exporters are solid," he said.
Due to the nature of the highly contagious delta variant, airline and energy stocks have been hit especially hard. On Tuesday, stocks extended their losing streak to a third consecutive session, following a U.S. stock plunge. The benchmark KOSPI retreated 11.34 points, or 0.35 percent, to close at 3,232.7 points. Trading volume was moderate at about 963 million shares worth some 15.1 trillion won ($13.1 billion), with losers outnumbering gainers 680 to 192.
Foreigner investors sold a net 181 billion won, while retail investors bought 38 billion won. Institutions purchased a net 152 billion won. Samsung Electronics closed unchanged at 79,000 won, and No. 2 chipmaker SK hynix retreated 0.42 percent to 118,500 won. Portal giant Naver moved down 0.9 percent to 439,000 won, and leading carmaker Hyundai Motor edged down 0.22 percent to 227,000 won.
