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Investors Worry as KOSPI Falls

Posted November. 21, 2007 03:08,   


Investors are increasingly concerned about the KOSPI, which has been falling for four consecutive days due to volatility in the global financial market. The KOSPI, which was projected to surpass 2,000, has seen a drop of more than 100 points in the last four days. This month alone, the KOSPI fell around 200 points, rapidly straining investor sentiment.

Some experts think the stock market in general will go up, while others say that the current sluggish pace will continue for a while. A correction in the domestic stock market is the result of the slow-down of the U.S. stock market and the Chinese government’s likely tightening of its monetary policy.

Hong Seong-guk, chief of the Research Center at Daewoo Securities, said, “The KOSPI will not reach 1,900 in the near future because the U.S. Dow Jones Industrial Average fell below 13,000.”

Research Center Chief Yoon Se-uk at Meritz Securities said, “The correction will continue by the end of this year. For the KOSPI, 1,900 was presumed to be the ceiling, but that has been revised downward to the 1,800 range.”

Many analysts think that the market will settle between 1,800 and 2,050, which is the highest point so far. Lee Jong-woo, the director of the Kyobo Securities Research Center, presented a similar projection about the correction period.

Experts think the domestic stock market will show improvement when the U.S. stock market, which is being blamed for the current slow-down, picks up. Therefore, larger than expected rate cuts by the Federal Open Market Committee (FOMC) on December 11 will help the domestic stock market.

When that happens, some expect that it will change the broad selling foreign investors are carrying out at the moment; however, others doubt that it will happen citing that interest cuts had been somewhat anticipated and China’s tightening of its monetary policy may mitigate the effect of the U.S. interest cuts.

Kim Hak-joo, the director of the Samsung Securities Research Center, said, “The U.S. cutting its interest rates is almost written on the wall because the overnight call rate of 4.5% cannot sustain the U.S. economy.” He added, “Interest rate cuts will address short-term issues, but the domestic stock market will remain stagnant for a while as the main reason behind the current downturn is the mortgage-backed lavish spending of the U.S.”

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