BUSINESS

Kospi to see relief rally ahead of G20 summit

By Jung Min-kyung
  • Published : Jun 24, 2019 - 17:32
  • Updated : Jun 24, 2019 - 17:52

South Korea’s benchmark Kospi ended higher on Monday, with cautious optimism that the US-China trade talks slated for later this week may help the index recover previously lost ground. 

It closed 0.03 percent or 0.71 points higher from the previous trading at 2,126.33, despite having jumped back and forth between positive and negative terrains throughout the day.
 
(Yonhap)

The local stock market in recent months has been heavily weighed down by the US-China trade war, which has escalated and dampened investor sentiment as a result. The chain of events also triggered overseas investors to net sell nearly 2.7 trillion won ($2.26 billion) worth of Kospi stocks in May alone, according to recent data from the Korea Exchange.

Experts agree that the days leading up to the June 28-29 G20 summit, where the US-China meeting is expected to take place on the sidelines, will result in a relief rally, which is a respite from market selling pressure that results in an increase in securities prices. The index is likely to move within a tight range of 2070-2170 or 2100-2150 this week, they added.

“There are still uncertainties surrounding the upcoming (US-China summit on the sidelines of the) G20 meeting, which is affecting stock transactions, but the Trump administration’s latest move to minimize expectations is projected to lead to a relief rally, solely based on the fact that the summit is expected to materialize,” Kim Byong-yeon, an analyst at NH Investment & Securities, said.

According to a Wall Street Journal report published Sunday, citing people familiar with the matter, US President Donald Trump is seeking to require next-generation 5G cellular equipment used in the US to be designed and manufactured outside China.

The best-case scenario for the local market is that Trump and his Chinese counterpart, Xi Jinping, decide to revive the trade talks that broke down in early May when the US president accused Beijing of making a U-turn on commitments to change its laws and enact sweeping economic and trade reforms.

Last month Trump threatened to impose additional tariffs on $300 billion worth of Chinese goods if the meeting with Xi yields insufficient progress, but experts and investors are hoping for a delay.

Even so, Kim expressed concern about the second-quarter performance of Kospi-listed firms, which is projected to fall below expectations.

“Pressure from the lackluster second-quarter earnings report is expected to weigh down the market within a tight range,” Kim said.

By Jung Min-kyung (mkjung@heraldcorp.com)


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