Foreign investment banks have painted a rosy picture of the local stock market’s performance this year, citing the country’s strong economic fundamentals, a report showed Wednesday.
Citigroup and other IBs also based their optimistic outlook on the undervaluation of the local stock market compared to their counterparts in emerging economies, according to the report by the Korea Center for International Finance.
In addition, the foreign IBs said the Korean government has ample room to take measures to stimulate Asia’s fourth-largest economy.
They predicted foreign investors are likely to turn to net buyers of Korean stocks this year after unloading a net 7.7 trillion won ($6.68 billion) in 2011, according to the report.
Citigroup recommended investors buy Korean and Thai stocks as Asian economies are likely to post a growth rate of around 7 percent through 2012-2013.
Morgan Stanley projected Korea and other emerging markets will cut its key interest rates this year in a bid to help counter a global economic slowdown, which will boost the stock market, the report said.
Nomura pointed out Korean stocks are undervalued and hold the potential for a big bounce after an 11 percent plunge last year.
The foreign IBs’s optimism is also grounded on global credit appraisers’ assessments that the death of North Korean leader Kim Jong-il last month will have no impact on South Korea’s sovereign credit rating, according to the report. (Yonhap News)