The Korea Herald


Q2 optimism, bullish IT lift Kospi outlook

By Son Ji-hyoung

Published : May 28, 2017 - 16:07

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The main stock market’s consensus net profit estimate for this year has been raised in the wake of a strong earnings forecast for the second quarter and buoyancy of IT firms at home and abroad.

The estimated net profit of all 536 listed firms on the first-tier Korea Composite Stock Price Index came to 143.6 trillion won ($128.3 billion), according to data by market tracker FnGuide as of Friday.

Compared to a January projection, when it stood at 126.9 trillion won, the annual net profit forecast rose 13.1 percent. The 2017 operating profit forecast climbed up by 11.2 percent from January one, the data showed.

The renewed forecast came as Korea’s main bourse index smashed the ceiling for five consecutive trading days throughout the week until Friday.

The Kospi closed at 2,355.3, up 0.53 percent compared to Thursday closing and up 2.92 percent from the previous Friday. 

(The Korea Exchange) (The Korea Exchange)
Market watchers said internal and external factors have been positive enough to contribute to its ceaseless bull run.

Korean firms posted robust earnings in the first quarter of 2017. On-year, the gross sales of the Kospi-listed corporates rose 8.4 percent and the operating profits in total shot up 25.3 percent.

On Thursday, the US Federal Reserve said it will “soon” raise the key rate, which has long sparked a capital outflow from emerging markets.

The US Federal Open Market Committee’s “hawkish meeting minutes,” however, “pose little threat” on the ongoing cash influx into emerging markets, especially into “undervalued” South Korea, wrote Han Dae-hoon, an analyst at SK Securities, in a Friday report.

“The earnings estimate in South Korea is rising at a sharper degree compared to other emerging market countries, reaffirming Kospi companies are expected to show improved earnings,” Han wrote. “Despite the Kospi record run, corporates still remain undervalued, bringing focus on banks and retailers in the second quarter.”

Moreover, international information tech giants’ stellar performance have powered the upward move in Wall Street and subsequently emerging markets. The broad-based S&P 500 and tech-heavy Nasdaq both hit fresh all-time highs Friday from Thursday record closing.

Riding the record rallies, the Kospi bellwether Samsung Electronics was ranked 14th in the world in terms of market cap as of Friday, up 12 notches from the end of 2016, according to Bloomberg estimate Friday.

When combined with the US juggernauts -- Facebook, Amazon, Apple, Netflix and Google -- and Chinese internet giants -- Baidu, Alibaba and Tencent -- the combined market cap of the nine IT firms rose to $3.45 trillion, up 31.8 percent from December 2016.

“The earnings momentum of IT industry stands out around the world, as it does in South Korea,” Jung Jae-hyun, an analyst at Hanwha Investment & Securities wrote in a Friday report. He cited the growing estimate for forward 12-month earnings per share and underrated price-to-book ratio in the IT sector across the world.

By Son Ji-hyoung (