European Money
European investors are expected to return to and lead a rally in KOSPI from this month. Experts are predicting that the index will be able to break the 2,050 point mark with a new upward momentum given by European funds, which were out of Korea for a couple of months.
Most local stock firms are estimating the upper limit for June at 2,070 to 2,100 points. Even the most conservative ones like Daishin Securities and Eugene Investment & Securities have suggested 2,050 points.
Such a positive forecast can be attributed to the European funds returning to Korea these days. Earlier this year, European investors pulled out of the Korean stock market one after another. They net-sold 850 billion won (US$830 million) worth of shares even in April, when the appreciation of the won led to a buying trend. This is quite contrary to the net inflow of U.S., Chinese and Japanese funds recorded during the same period.
However, the consensus is that the movement will be reversed from this month as some weak euro policy against deflation will be available at the ECB Monetary Policy Meeting scheduled for June 5. “Anticipated examples of the new expansionary monetary policy include negative deposit interest rate, long-term refinancing operation for small firms and ABS purchase, which are somewhat different from the Fed’s full-scale quantitative easing,” said Tong Yang Securities research analyst Jo Byung-hyun. He continued, “Then, “The European funds’ preference for risky assets will increase to some extent and the Korean stock market will have a chance to benefit from it.”
In the meantime, the Financial Supervisory Service recently announced that European funds recorded a net inflow into the Korean stock market between May 1 and 29. The only two exceptions were British and French, which showed a net outflow of 1.13 trillion won (US$1.10 billion) and 190 billion won (US$185.5 million) each.