KOSPI Outlook
Global investment banks predict that the KOSPI will surge nearly 20% next year.
According to Bloomberg’s analysis on December 9 about the prospects for South Korean stocks in 2014, experts from 15 investment banks such as Goldman Sachs, UBS, and JP Morgan said that the KOSPI would edge up 18% on average to reach 2,341 points next year, surpassing the previous record of 2,228.96 points in May 2011.
In the report published on the same day, Credit Suisse predicted that the KOSPI would rise to 2,400 points by the end of 2014, well above investment banking experts’ forecast of 2,341 points. Goldman Sachs estimated the figure at 2,350 points, higher than those experts’ predictions.
The reason for global investment banks’ positive outlook on the Korean stock market lies in the fact that local firms’ profits are expected to increase in 2014, and stock prices are still considered to be undervalued.
Credit Suisse wrote, “Korean companies’ performance in 2014 is likely to be better than this year. In particular, stocks related to energy and banks that showed poor results in 2013 are expected to go up dramatically next year, because of a rise in domestic demand.” For promising investments, it listed undervalued stocks of companies, which include the likely beneficiaries of advanced countries’ economic recovery – Samsung Electronics, Hyundai Motor Company, and SK Hynix. It also listed probable beneficiaries of restored domestic demand — Shinhan Financial Group, Hana Financial Group, Daelim Industrial Co., and Hyundai Development Company. Finally, it itemized companies that would see a resurgence due to previous large declines in their stock prices such as Hyundai Heavy Industries, Lotte Chemical Corporation, S-OIL, NCsoft, and Seoul Semiconductor.
In the meantime, Bloomberg reported that foreign investors have been buying Korean stocks worth US$13.5 billion in the latter half of this year, affected by US$9.51 billion of the nation’s current account surplus in October and a positive trend in exports. In addition, it stressed that the Price on Book-value Ratio is still 29% lower than the MSCI Asia Pacific Index, even though the KOSPI climbed 11% compared to the figure for June, which is this years’ low.