Analysts cautiously say it may be good time to invest in Korean stocks


The Korean stock markets this week are the Asian crisis revisited, according to many investors on Tuesday who watched with despair as the main bourse tanked in just 48 hours.

None of the nation’s brokerages correctly predicted such a decline, with most including top names such as Samsung Securities and Daewoo Securities expecting the benchmark KOSPI to rise to up to 2,300 points. Woori, Shinhan and Hyundai also forecast 2,200 as the ceiling. 

Local analysts have become increasingly defensive about their forecasts, with many refusing to speak up about when the nightmare will be over.

But they also did not want to call it a day or announce that all was lost.

This is because just as stocks gradually recovered ground in the aftermath of the 1997-98 crisis, there is still hope.

“The issue here is ‘when,’ because the KOSPI index has actually fallen to what we previously called the bottom,” said Kim Byung-ki, an analyst at Kiwoom Securities.

Defining the current stock market as “irrational,” Kim said it would be difficult to try and forecast when and by how much the bourse would pick up.

He cautiously predicted, however, that it did not appear to be a “double-dip” situation, and that for the companies whose fundamentals have not been called into question, it will be a matter of time before they recover.

Investors also seemed to believe the same, especially for the stocks of companies that have been performing at par over the past year.

Samsung Electronics tumbled to below 800,000 won ($745) per share after hovering near 1 million won earlier this year on the back of a stellar performance last year.

The first two quarters of this year for the electronics company could have been better, but were still mostly in line with expert forecasts.

LG Chem, which had soared to record-highs this past year on an outstanding year in 2010, rising to above 500,000 won, also sank to under 400,000 won.

“I was considering buying up to 50 million won of Samsung Electronics stocks on Monday, but decided against it, thinking prices are going to fall further, so I’m waiting for my moment,” said Kim Ji-hwan, a 34-year-old salaried worker.

He refused to be too pessimistic, saying he was sure it would bounce back. “It’s a matter of time,” he said.

Investors who are less fortunate than Kim in terms of funds to invest admitted to bigger jitters.

“I am lost, and nobody seems to have any answers,” said one investor who declined to be identified. He said he lost some 5 million won on Monday and expected to lose more this week as he can not bring himself to sell.

Kang Jung-won, an analyst with Daishin Securities said eventually, the market would get back in place, but added the situation looked cloudy.

His consolation was that for certain industries, such as IT, fundamentals were not too great to start with and therefore won’t get worse.

“Our forecasts for the IT sector, for instance, were not that great to start with, so we really don’t think in terms of fundamentals, things will get worse,” Kang said.

IT stocks, which have been a market indicator, have been faltering over the past several months on sluggish demand due to a slow global economic recovery.

On the whole, Kang said it may not be a bad time to pick out stocks from fundamentally strong companies to invest in while the market is on a bearish run.

By Kim Ji-hyun (jemmie@heraldcorp.com)