Kospi correction likely to be short-lived, upward momentum still intact: analysts

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South Korea’s benchmark Kospi market shed 5.2 percent to fall below 3,000 last week as the volatility in Wall Street from the intense tug-of-war between retail investors and institutional short sellers over GameStop stock spilled over to Seoul, but the correction proved to be short-lived.

The Kospi finished Monday 2.7 percent higher at 3,056.53 and Kosdaq 3 percent at 956.92.

“A correction within 10 percent is not significant to turn the tide, and the benchmarks will likely reach previous peaks within three months,” said Choi Seok-won, the head of research team at SK Securities.

Samsung Securities’ Yoo Seung-min also said that the current correction does not mean a long-term downward trend of the Kospi. Once the temporary market frenzy caused by GameStop is eased, local stock market would rebound by narrowing its gap with the real economy, he added.

Market experts project the economic recovery and strong performance of businesses to buttress the Kospi in the longer run.

A Kospi in the range of 2,800 to 3,200 is desirable for a breather from the almost uninterrupted rally since the year-end, and investors don’t need to worry unless the Kospi falls below 2,800, according to Choi.

Seol Tae-hyun from DB Financial Investment said the sound preliminary earnings of key companies have eased the burden of the high valuation and projected profitability of major firms including chipmakers and automakers could recover to the level of 2018.

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