Will KOSPI achieve major turnaround in Q2?

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By Lee Min-hyung

The benchmark KOSPI is expected to achieve a major turnaround in the second quarter, on hopes of a global economic recovery and diminished monetary uncertainties, even if Russia's prolonged invasion of Ukraine remains as a risk factor, analysts said Monday.

The main bourse displayed a lukewarm performance throughout the first quarter as investors avoided risky assets amid heightened external uncertainties such as the outbreak of war in Eastern Europe and the U.S. Federal Reserve's rate hikes.

But analysts remained optimistic over the near-term outlook of the main bourse, as multiple risk factors have already been reflected by the tepid stock performance here in the first quarter.

"The KOSPI is expected to outperform the global stock market between April and June as chip market conditions will improve and the global economy will be on track for a recovery," Daishin Securities analyst Lee Kyoung-min said.

But the analyst also advised investors to refrain from going on an unconditional buying spree of local stocks, due to a strong chance that the KOSPI and major global stock markets will experience heightened volatility until mid-April.

"The global economy will bounce back in the second quarter, but more time is still required (for a stable rebound) due to the Ukraine crisis," he said.

The main bourse has been trapped in a band of 2,600 and 2,750 points for the past month, but the brokerage house expected the KOSPI to rise to as high as 2,800 points this month.

Analysts also picked chip, automotive and secondary battery stocks as the most-preferred investment areas, as the global supply bottlenecks will alleviate gradually. This will drive the additional growth of such export-dependent stocks, according to the brokerage house.

Analysts also downplayed the impact of the Fed's possible rate hikes of 50 basis points in May.

"The U.S. Fed ended the era of the near-zero rate by raising the key rate by 25 basis points in March, and there stands a chance that the authority will take a big step in its monetary policy as early as May by pushing for rate hikes of 50 basis points, but the possible impact on the local stock market is limited," said Ahn Jin-cheol, an analyst at Korea Asset Investment Securities.

The analysis came as market participants have already taken into account related uncertainties when investing in the local stock market, so the issue will not exert major downward pressure on the main bourse, according to the analyst.

The brokerage also expected the KOSPI to top the 3,000-point mark before the end of June, as the aforementioned external uncertainties will be cleared gradually away in the second quarter.

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