By Lee Min-hyung
The benchmark KOSPI has suffered fewer shocks than major stock indices in New York, Hong Kong and Shanghai, as the earnings fundamentals of listed Korean firms are expected to remain robust until the latter half of this year, analysts said Monday.
According to data from the Korea Financial Investment Association, Korea's main bourse fell by 11.41 percent as of May 27, compared to the end of 2021. But the drop was not as steep as those of the aforementioned overseas indices.
The Nasdaq extended a bigger loss of 22.45 percent during the same period on fears of a gradual tightening of monetary policy in the world's largest economy. The S&P 500 also dropped by 12.75 percent for the past five months on such monetary factors and widening external uncertainties sparked by Russia's invasion of Ukraine.
Asia's economic powerhouses have also had to endure a heavier beating than Korean stocks. The Shanghai Stock Exchange Composite Index fell by 13.5 percent, while the Hang Seng Index in Hong Kong suffered a fall of 11.54 percent during the same period.
Market analysts said Korean stocks suffered less damage, as the earnings performances of Korean firms remain solid.
"For now, the KOSPI is notably undervalued in terms of fundamentals as well as the earnings outlook of listed companies," Daishin Securities analyst Lee Kyoung-min said.
The expert predicts that the main bourse will regain momentum for a relief rally soon, as fear sentiment in the local stock markets has almost peaked.
"The KOPSI is projected to reach the 2,700-point mark after possibly achieving a technical rally soon, and chances are the index can bounce back to more than 2,800 points with a stronger relief rally," the analyst said.
Even if we assume that major companies' earnings growth is limited and an economic recovery falls short of expectations, the main bourse still has room for growth of around 10 percent in the latter half of this year, according to Lee.
"As once-escalating fears of a possible giant step of (U.S. Federal Reserve) rate hikes of 0.75 percent have faded away and the global economy is unlikely to enter the trap of recession in the next few months, the stock indices of major global financial markets will be on a relief rally."
A soaring won-dollar exchange rate was another key reason that recently sparked a mass exodus of foreign investors. Starting this year, the exchange rate has been on a steep rise, reaching slightly below a worrying level of 1,300-won per dollar in early May.
However, the figure has recently shown signs of stabilizing, falling to around the 1,240-won mark on Monday, which reduces the likelihood of investors' mass exodus from the local stock market from a near-term viewpoint.
Huh Jae-hwan, an analyst at Eugene Investment & Securities, however, remained pessimistic over the exchange rate's stabilization from a mid-term perspective.
"It is very exceptional that the won-dollar exchange rate topped the 1,250-mark," he said. "Even if the rate will not soar at an alarming pace until the third quarter of this year, it is projected to reach around a band of 1,310 to 1,320 won by the end of this year."