Seoul shares are expected to bounce back slightly this week following a big drop Friday due to fears that Iraq could be sliding toward civil war, which are likely to be a one-off factor, analysts.
The benchmark Korea Composite Stock Price Index closed down 0.23 percent, or 4.63 points, to 1,990.85 on Friday from a week earlier.
Compared with Thursday’s session, the KOSPI nosedived 1.03 percent, or 20.80 points last Friday, as foreign investors were spooked by news of unrest in Iraq. They went on a selling binge of builders and big caps like Samsung Electronics.
Analysts said the effect of the Iraqi issue on the market will not last long. Instead, investors will focus on the first-half corporate earnings, they said.
“The Iraqi factor will be short-lived on the market and foreign investors are not expected to keep selling shares,” said Kim Hyong-ryol, an analyst at Kyobo Securities.
The outcome of the Fed’s June regular policy meeting slated for Thursday is also likely to have little impact on the local market as another $10 billion tapering of bond purchases is already widely expected.
The Fed began a gradual exit from quantitative easing in December and has since reduced its bond purchases by $10 billion every month.
“The market will face a technical rebound next week as it went through a sharp drop on Friday,” Kim said.
Kang Hyun-gie of I’M Investment & Securities, however, took a cautious stance on a positive outlook.
“I agree the Iraqi issue is a short-term factor on the local market, but it could pull up oil prices to put a financial burden on companies,” he said.
“It may become a trigger for shrinking investors’ appetite for risky assets,” Kang added. (Yonhap)