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Korea shares seen up on cheap blue chips

SEOUL: South Korean stocks are likely to recoup some losses on bargain-hunting in blue chips this week, but persistent sales from investment trusts would limit the market's upside, analysts said.

Given the lack of domestic market-moving factors, analysts said the only source of direction was the low price of many traditional blue chip stocks.

"On Thursday and Friday, the market was boosted as foreign and some institutional investors targeted traditional blue chip titles," said Kim Chang-hee, a market strategist at Seoul Securities. "We may see more investors moving cash to traditional blue chip stocks from high-techs."

A sharp rebound in blue chips on Wall Street late last week had prompted the buying of low-priced South Korean blue chips, analysts said.

But Kim said the market would lack star stocks this week.

"There's no clear momentum or investment theme on the horizon," he said.

Blue chip purchases offset net selling from investment trust companies and individual investors, helping to cushion the composite index from falling steeply.

The benchmark Korea Composite Stock Price Index (KOSPI) closed Friday at 855.57, down 35.79 points or 4.02 percent from a week earlier.

INVESTMENT TRUST COMPANIES CONTINUE TO SELL

Analysts said investment trusts would continue to sell shares to raise capital as they remain vigilant about re-enlisting investors in funds they manage which are nearing expiration.

In the past, many investors simply put money into new funds as old funds expired, but many fund managers say that is changing.

"The situation is different from last year when raising capital for new funds took a couple of hours. That's because unlike last year, there's no clear sign that the market will see any sustained rally," said Ko Hee-tak, a fund manager at Seoul Investment Trust Management Co.

Ko said only 25 percent of the investors who have their money in existing funds are willing to put their money into the newly launched funds.

Analysts said with investment trust management companies under selling pressure, the KOSPI will move within limited range of 840 to 870. -Reuters