'KOSPI, Kosdaq to be trapped in boxed ranges until Q3': analysts

'KOSPI, Kosdaq to be trapped in boxed ranges until Q3': analysts

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By Anna J. ParkAfter a three-day break for to the Chuseok holiday, the benchmark KOSPI closed on a slight decline Thursday at 3,127.58 points, a 0.41 percent fall from last Friday.The index fell as low as 3,118.25 at around 11:47 a.m., but rose to 3,131.63 at around 2:10 p.m. before dropped to 3,127.58 at the close of trading. The increase during the latter part of the day was primarily attributed to buying by foreign investors who net-purchased 553 billion won ($470 million) worth of shares, as investment sentiment for riskier assets somewhat revived after Chinese and Hong Kong stock market indices showed signs of stability. Most large-cap companies’ stock fell slightly ― of the 10 largest market cap companies listed on the KOSPI, only three firms ― LG Chem, Samsung SDI and Celltrion ― saw their share prices rise. LG Chem particularly rose by 7.99 percent.”The resumption of battery supplies for GM electric vehicles stoked LG Chem’s stock price Thursday, while expectations of increased tourism demand led to rises in major aviation stocks,” said Kim Seok-hwan from Mirae Asset Securities.By sector, communications, medicine, chemistry and transportation services rose Thursday, while steel, banking and construction stocks fell. The tech-heavy secondary Kosdaq also fell by 0.94 percent, finishing at 1,036.26.No major drop expected despite Evergrande debt crisis The three-day pause in trading benefited the country’s stock prices as the market digested concerns regarding China’s Evergrande Group and uncertainty from September’s Federal Open Market Committee (FOMC) meeting, said stock market analysts.While experts’ expressed opposing views on the weight of the Evergrande crisis on the global stock market, their common ground was that it was unlikely to produce a major fall on the KOSPI for the time being. “Even if the Chinese authorities do not provide direct support for the Evergrande Group, the impact from a possible default is expected to be limited, as six major Chinese state banks are estimated to hold an ample capital buffer to absorb the group’s debt,” Kim Jun-yong, an analyst at NH Investment & Securities, said. September’s FOMC meeting also finished without jolting the market gravely, it froze the key interest rate. While half of its 18 members forecast the first interest rate hike to take place in 2022, what is significant for an immediate impact on the global market is employment figures as well as corporate performances in the third quarter.With unresolved potentially destabilizing factors such as Evergrande remaining, local stock markets are expected to be trapped in boxed ranges until the end of the third quarter, experts say. Despite possible short-term corrections, the market is unlikely to face any drastic moves anytime soon. “An important fact to note is that that global liquidity supply will be maintained until the first half of 2022,” Lee Kyoung-min, a strategist at Daishin Securities, stressed. “Although the amount of liquidity supply could dwindle, the ample liquidity environment for the global market will hold for the time being, which is likely to maintain a favorable environment for the stock market for now,” the strategist added, saying the stock market’s direction will be determined by global macro factors and corporate fundamentals in the near future.

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