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| gettyimagesbank |
By Lee Min-hyung
Korea's capital markets will gain gradual traction for a soft landing, as the Bank of Korea (BOK) is forecast to end its rate hike cycle at the current level amid diminishing inflationary woes here, analysts said Tuesday.
Even if local financial markets are still clouded with uncertainties ahead of a full-fledged recovery, market participants will slowly regain their confidence in the Korean economy, which is forecast to face a lower risk of additional volatility, they said.
Macroeconomic uncertainties ― sparked by the U.S. Federal Reserve's ultra-hawkish rhetoric prevalent for the past year ― were undoubtedly the biggest obstacles getting in the way of a rebound of the local stock and real estate markets for the past year.
But as the BOK is highly likely to freeze its key rate at 3.5 percent again during its rate-setting meeting next week, investors are expected to regain their confidence earlier than expected in the local capital markets, according to market analysts.
"Any uncertainties (surrounding the macroeconomic factor) will not aggravate further down the road, as the end of the ongoing cycle of rate hikes appears imminent," Hwang Joon-ho, an analyst at Sangsangin Investment & Securities, said. "Local stock market participants will not react sensitively to the Fed's possibly upcoming rate hikes, as there stands an ample possibility that the BOK will end its rate hike cycle (at the current level)."
The benchmark KOSPI has proven to be resilient in recent weeks. The main bourse fell to around 2,350 points in early March, but has since been on course for a gradual recovery close to the 2,500-point mark as of Tuesday. It remains to be seen if the momentum will continue to pick up steam in the coming weeks, but analyst expected stock markets from emerging economies to display a favorable pattern unless the value of the U.S. dollar soars abruptly.
Decreasing concerns over inflation also raise hopes for the BOK to end its monetary tightening cycle. Korea's consumer prices increased 4.2 percent in March from a year ago, according to data from Statistics Korea, Tuesday. This is a drop of 0.6 percentage point from a month earlier and the lowest monthly rise in a year.
Other analysts also expected the main bourse to achieve a gradual rally in the second quarter.
"Chances are Korea's exports and corporate earnings have bottomed out," Samsung Securities analyst Kim Yong-goo said. "The KOSPI's target band in April will be around 2,200 and 2,500 points and the figure will be on the rise until June when it is forecast to move within a band of 2,300 and 2,600 points."
Shinhan Securities analyst Roh Dong-gil expected the KOSPI to recover to as high as 2,550 points in April. He said the local stock market will show decent performance before the economy enters a path of recession.
Regarding the real estate market, the analyst said the worst has passed.
"The real estate market cycle is still a critical factor, but our view is that such pending issues as construction suspension and financial regulations have been resolved," he said.
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