Despite sharp falls in the first week of the year, the country’s stock market may gain ground this week on the back of optimism for a global recovery, stock market analysts said.

The benchmark Korea Composite Stock Price Index, or KOSPI, finished at 1,946.14 last week, down 2.1 percent from a week earlier.

The KOSPI declined for the second straight session on last Friday as the local currency’s rise against the dollar and the yen raised fears of a negative impact on exporters. Foreign investors unloaded a net 260 billion won worth of stocks on the main Korean bourse last week.

The Korean currency closed at 1,050.30 won to the greenback Thursday, its strongest level in more than two years. The won also appreciated against the yen on the same day to a five-year record.

Analysts said that the KOSPI was likely to rebound this week as hopes for the global recovery linger in the New Year.

“Market interest rates are expected to moderately gain as Federal Reserve Chairman Ben Bernanke may emphasize in his speech on Saturday that the reduction of quantitative easing is different from monetary tightening,” said Park Seung-young, a market analyst at KDB Daewoo Securities.

But market watchers said that exporters including tech shares and carmakers may suffer weakness further as the won’s ascent is likely to continue.

On the home front, the rate-setting session by the Bank of Korea slated for Thursday is not likely to have major impact on the market as the central bank is expected to freeze the key rate for the eighth straight month in January. (Yonhap News)