Kospi to trade in 2,100~2,400 range in January on economic concerns: analysts

[Photo by MK DB]

Stock market experts are projecting Korea’s benchmark index Kospi to stay between 2,100 and 2,400 range in the first month of 2023 as the global economy slows and inflation remains high.

The Korean stock market will likely continue the movement seen at the end of 2022, Kim Dae-joon, an analyst from Korea Investment & Securities Co., said in a report published on Monday. A rebound will not be easy due to high inflation and global economic slowdown, as well as burden from the upcoming earnings season, Kim said as he advised investors to maintain investment focus on when the market bottoms out and refrain from making additional investments until then.

The Kospi is expected to move between 2,160 and 2,400, Kim projected.

Lee Kyung-min of Daishin Securities Co. made a similar forecast. The January Effect, a purported market anomaly whereby stock prices regularly tend to rise in the first month of the year, is what investors hope, Lee said. Rather, investors should pay attention to the effect from the supply-demand issue from December, he advised.

The margin account balance has come down by more than 13 trillion won ($10 billion) since mid-November and 3.3 trillion won worth of inflow from early December ahead of ex-dividend dates, Lee noted, warning that supply could rise from investors seeking to cash out.

Kyobo Securities building [Source: Kyobo Securities Co.]

Kyobo Securities Co. in a recent report projected the Kospi to stay between 2,120 and 2,400 in January, explaining that the month will be the time of the year to check any falls in corporate earnings, deterioration in macro-economic index and economic downturn.

It is too early to project when the economy will bottom out, said the Kyobo Securities report. It is better to limit investment to individual companies rather than putting a focus on the market as a whole, it said.

Lee Jae-man of Hana Securities Co. forecast the Kospi to reach bottom in January at around 2,200.

Kospi had formed double-bottom base in 2008-2009 when the stock market’s rate of return slowed as now, noted Lee. If double-bottom base is formed with easing of credit risks in Korea, as well as in the U.S. and China, the Kospi’s new bottom could go up higher than the recent bottom of 2,130, the analyst projected.

Although downward adjustment is inevitable in January, the index is seen to have neared the bottom, Lee said, adding that investors should expand stock investment when the market reaches its second bottom.

Samsung Securities Co. forecast the Kospi to move between 2,100 and 2,400 in January, with gradual increase to between 2,150 and 2,450 in February, followed by additional rise to between 2,200 and 2,500 in March.

The market will likely grow more insensitive to downside factors, as they are already factored in, and respond more sensitively to favorable news, said Kim Yong-gu, a Samsung Securities analyst. The market will likely move faster when interest rates peak out from pivot in inflation rates and also after the Chinese government unveils its new economic policies, Kim added.