Securities firms lower outlook on KOSPI’s growth

Securities firms are on track to lower the outlook on the benchmark KOSPI, citing the possibility of Korean stocks entering a readjustment period after achieving a vigorous rally throughout January.

They expected the local stock market to face widening volatility this month amid rekindling woes over global monetary tightening after the U.S. reported robust job recovery. Key economic indicators also reacted sensitively to the job data, with the U.S. dollar strengthening its value again in response to the heightened fears of the U.S. Federal Reserve extending its hawkish rhetoric. Wall Street and stocks from emerging countries also plunged amid the abrupt shift in the global monetary atmosphere.

Most brokerage houses are also moving to reduce their target band of the main bourse here. Samsung Securities presented the KOSPI’s upper band at 2,550 points in February, down 50 points from its 2023 outlook shared at the end of 2022. KB Securities also estimated the KOSPI’s upper limit at 2,560 points, down 50 points during the same period.

Market analysts said the main bourse will continue to be trapped in a boxed range of around 2,500 points this month.

“The KOSPI will move in the boxed pattern with an upper limit of 2,500 points for the time being,” SK Securities analyst Kang Jae-hyun said. “Chances appear slim for the economy to bounce back at a time when central banks across the globe reiterate their willingness to tame inflation, and market participants are increasingly anxious about (the Fed’s) return to its ultra-hawkish stance in its monetary policy.”

Other analysts said the upcoming result of the U.S. consumer price index (CPI) will determine the future of local stocks in the short run.

“The market almost ignored the Fed’s recent announcement that it does not consider cutting key rates in 2023,” Ahn Young-jin, another analyst at the brokerage house, said. “The near-term outlook of the market will be determined by the result of the upcoming U.S. CPI in January.”

The January 2023 CPI data will be released on Feb. 14.

Another key factor is whether foreign investors will continue to engage in a buying spree of local shares. They purchased Korean shares worth more than 7 trillion won for the past month, driving the recent rally of the main bourse which started at around the 2,200 point mark at the start of 2023. The KOPSI has since extended gains and recently lost momentum for an additional rally. As of Tuesday, the main bourse closed at 2,451.71 points.