Korean GDP to grow 3.6%, Kospi to hit 2,850 in 2021: Nomura
Driven by the development of COVID-19 vaccines and their eventual distribution, South Korea’s economy will steadily recover in 2021, growing at 3.6 percent followed by a 0.8 percent contraction this year, according to Japan’s Nomura Securities on Thursday.
“Amid the global capex (capital expenditures) recovery, current IT export products and new export products such as electric vehicles and biohealth will play a leading role in driving South Korea’s economic recovery next year,” said Jung Chang-won, head of equity research for South Korea at Nomura Securities, at a conference.
With export growth to lead Asia’s fourth-largest economy’s recovery in the first half of next year, consumption recovery is anticipated to be followed in the second half of the same year on the back of the wider distribution of vaccines from the second half of next year.
The brokerage suggested its won-dollar currency target next year at 1,030 won, along with setting the yearly upper-end target for Korea’s main bourse Kospi to 2,850, mentioning the market already entered the recovery phase in the second half of this year.
“We believe the Kospi market will appreciate factors such as high sustainable growth of the fourth industrial revolution, bio and environment, strong earnings from cyclical sectors such as memory and displays, and earnings recovery from sectors that were directly hit by COVID-19,” said Park Jeong-woo, chief economist for South Korea at Nomura Securities.
Buoyed by improving corporate governance and shareholder returns on an environmental, social and governance responsibility boom and enhancing regulations on corporate governance, he further mentioned that the “Korea discount” -- the market term describing foreign investors’ lower equity valuation of local stocks -- is also anticipated to narrow.
Park added that small domestic investors’ massive investing into the stock market is at the beginning phase and is likely to continue, citing data that Korean investors’ stockholdings among their total assets marked less than 10 percent, while retail investors in advanced economies came to 30-40 percent.