Kospi outlook for 2022 mixed on political calendar and tightening environment

2022.01.03 13:25:22 | 2022.01.03 14:33:25

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South Korea’s key stock index Kospi is projected to move in a modest range of between 2,800 and 3,400 this year with outlook mixed due to uncertainties depending on the outcome of the March presidential election and shift to tightening around the globe in the aftermath of ultra-loose policy in pandemic period.

Research center directors at six major securities firms in a poll by the Maeil Business Newspaper project a peak from 3,200 to 3,600 this year, with the most optimistic projection issued by KB Securities.

Kospi’s valuation would rebound as inflation worries ease and China expedites stimuli, projected Yoo Seung-chang, head of KB Securities research center.

The most conservative projection is 3,200 by IBK Investment & Securities.

Analysts’ consensus on the Kospi’s lowest is projected at 2,610-2,800.

Their top stock picks for this year are in semiconductor, automobile and secondary battery categories. Outlook for media contents and biotechnology stocks are also bullish.

Semiconductor and automotive stocks are expected to rebound as supply chain disruptions and other challenges would likely ease while car exports expand this year, analysts predicted.

Secondary battery stocks will likely continue growth this year, as transition from internal combustion engine to electric cars goes in full swing. The battery stocks would show an exceptional growth in the otherwise stagnant stock market as their worth would come under renewed spotlight when inflation stabilizes, argued Jung Yeon-woo from Daishin Securities. Jung’s top picks for this year are EcoPro BM and Chubo, as well as chip heavyweights Samsung Electronics and SK Hynix, and auto giant Hyundai Motor.

Media and biotech stocks also look promising, according to analysts.

Digital content industry appears to have entered the phase of demand growing sharply as platforms’ market penetration has topped 60 percent, observed Yoo of KB Securities. Biotech stocks are growing more attractive following price corrections on top of expectation for clinical trials and investments, added Yoo.

Naver, the country’s major internet stock, was the top pick for Jung Yong-taek, IBK Investment & Securities research center head. Jung anticipated Naver to expand its presence in the global contents market through its partnership with Yahoo Japan in e-commerce and story-telling platforms.

Air travel and retail stocks could be attractive for bargain hunters.

Emart and Korean Air Lines would likely benefit the most, projected Oh Tae-dong of NH Investment & Securities.

Monetary tightening trend would pose as downward risk. U.S. Federal Reserve has turned hawkish by discussing faster tapering and interest rate increases, in which case Korean capital market may experience big outflow and stronger volatility. It is also yet uncertain when inflation would slow.

Conflicts between countries may grow heavier as economies struggle to recover from Covid-19 fallouts. The contest for growth could intensify as in the 2009 currency war, warned Lee Kyung-soo of Meritz Securities, adding that there are uncertainties presented in the national security and energy sectors.

Political uncertainties also weigh over the economy due to the presidential election in March.

If the ruling wins the election, the environment sector would benefit, and if opposition party becomes the winner, construction and nuclear power sectors would benefit, said Oh.

Analysts’ projection for Kospi’s movement for this year overall is mixed.

DB Financial Investment and Kyobo Securities projected the Kospi to perform stronger towards the second half of the year after inflation peaks out. NH Securities predicted stronger growth in the first half with possible easing in global supply chain trouble.

By Cha Chang-hee, Kang Min-woo and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]