The Korea Herald

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Seoul shares likely to face correction next week: analysts

By Sohn Ji-young

Published : July 22, 2017 - 10:05

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South Korean shares are likely to undergo a correction next week as the ongoing diplomatic row with China is expected to cause weaker earnings for local carmakers and cosmetics firms, analysts said Saturday.

The benchmark Korea Composite Stock Price Index (KOSPI) closed at a fresh record high of 2,450.06 points on Friday. 

The main index rose 1.5 percent this week helped by strong second-quarter earnings results in financial and chemical firms.

LG Chem Ltd. posted a 57-percent on-year rise in net profit and KB Financial Group Inc. saw its net income jump 71 percent.

But next week, top carmaker Hyundai Motor Co. and cosmetics giant AmorePacific Corp. are expected to release poor earnings results for the April-June period as their sales backtracked sharply in China due bilateral tensions, analysts said.

China has taken retaliatory measures against South Korean exporters to express its discontent with the deployment of an advanced U.S. missile defense system in South Korea. Beijing has argued the anti-missile system could be used against it though Seoul and Washington have said it is only aimed at countering North Korean nuclear and missile threats.

Moreover, Hyundai Motor is in talks with its hardline labor union over wages and any breakup in the ongoing negotiations will lead to strikes. Investors remain cautious about any new developments in the wage talks as walkouts lead to production losses.

“Technology firms such as Samsung Electronics Co. and SK hynix Inc. are widely forecast to announce strong results for the second quarter. But such predictions have already been factored in the market,” Park Choon-young, an analyst at Daishin Securities, said.

On Thursday, the world‘s No. 1 chip giant Samsung Electronics ended at a record high price of 2,560,000 won, giving a boost to the KOSPI index.

In the coming week, the KOSPI may fall to the 2,390 range depending on the second-quarter earnings results by carmakers and other exporters heavily dependent on sales in China, Park said. (Yonhap)