With foreign investors continuing net purchases for South Korean stocks this year, global investment banks (IBs) have also posted positive outlook for South Korean stocks with some predicting the country’s benchmark KOSPI to top 3,000 near the end of this year.
According to IB industry sources on Feb. 4, five foreign IBs offered “investment weight expansion” to Korean stocks while two issued “neutral position.”
Nomura has set its target mark for KOSPI at 3,000 and Citigroup at the range of 2,400 to 3,000. Goldman Sachs and Credit Suisse predicted the index could reach 2,900 this year. Bank of America Merill Lynch, JP Morgan, and HSBC marked their target at around 2,800.
Korea has the second-largest number of “investment weight expansion” opinions in Asia following China. The foreign investment banks picked global economic recovery, increase in shareholder values caused by improvement in Korean corporate governance structure, and inflow of foreign capital due to growing investor preference for riskier assets as positive factors for Korean stocks. In particular, there were many expectations about the expansion of Stewardship Code, including the voting rights of institutional investors, in the second half of the year.
They, however, warned of downside risks such as moderation in demand with economy slowing down its growth pace, higher-than-expected inflation, Korean won’s strengthening against the U.S. dollar, and North Korea-related geopolitical risks.