20000131

Seoul stocks likely to overcome downward pressure

SEOUL: South Korean stocks are likely to overcome early downward pressure this week, supported by sturdy gains in futures and a fall in key local interest rates, analysts said.

But they warned there could be a flurry of profit-taking in the early part of the week, spurred by Friday's slide in U.S. stocks.

"A decline in local interest rates are seen offsetting negative impact from Dow's tumble on Friday," said Kim Cheong-whan, a strategist at LG Securities.

The benchmark Korea Composite Stock Price Index (KOSPI) closed on Friday up 32.44 points, or 3.57 percent, at 941.67 points. It rose 1.8 percent for the week.

Analysts said the impact of Wall Street's pains would be short-lived as many market participants viewed a decline in key interest rates late last week as indicating fears of Daewoo bond redemptions had eased.

Leading foreign creditors recently agreed a deal with South Korean creditors to receive around 40 percent of the principal owed to them by four affiliates of the troubled Daewoo Group.

"(The) Dow's plunge will likely trigger profit-taking by short-term players on telecom and securities titles which had seen sturdy gains over the past few days," said Lee Young-mok, a strategist at Daewoo Securities.

But analysts saw hope of liquidity-driven gains amid a growing consensus that bond fund redemptions would fall far short of the cash amassed by the investment trusts.

Market players believe that fading concerns of massive fund redemptions should encourage trusts to shift into equities.

The government is set to raise the ceiling on Daewoo bond redemptions to 95 percent on February 8 from the current 80 percent.

Analysts said domestic investors may take a cue from recent rises in the KOSPI 200 futures market where foreign investors were increasing their net positions.

"A turnaround into futures buying by foreigners has been enticing more investors to follow suit on the spot market," Lee said. March futures on the KOSPI index were up 3.80 points at 119.80 on Friday.

Analysts see the main index moving in a range of 900 and 970 points this week with profit-taking setting in if the index rises above 950 points.

They expected rotational buying into traditional value sectors to hoist the index higher along with sectors left out in recent focus on Internet-related shares.

Some brokers expected the speculative over-the-counter Kosdaq market to rise despite Friday's tumble in the U.S. Nasdaq index, amid a general belief that the market had approached rock bottom.-Reuters