[THE INVESTOR] The momentum of South Korea’s benchmark KOSPI has decelerated after touching the psychologically important 2,000-point level last month but it has sufficient potential to move further up, a local brokerage firm said on Aug. 8.

“The upward momentum slowed as expectations for monetary policy have weakened,” said Kim Young-hwan, an analyst at Shinhan Investment.

The price movements on KOSPI have been stagnant with its daily volatility averaged at 2.14 percent, or 41 points, during the past four weeks, according to the data compiled by the Korea Exchange.



The KOSPI rose 0.54 percent to close at 2,028.84 points on Aug. 8.

“A September rate hike is becoming more likely in the US as its job creation soars and its financial market quickly recovers losses incurred in the aftermath of the Brexit referendum,” he said.

There are growing concerns that the Bank of England will only take an actual steps on monetary easing after real economic indicators confirm the predicted Brexit slowdown.

The analyst, however, said the market’s concerns about uncertainties are excessive.

“The BOE dispelled worries about its indecisive monetary policy by announcing a stimulus package that exceeded market expectations last week,” he said.

Fall in eurozone bond yields stemming from the UK’s purchase of government bonds could strengthen the inflow of global bond funds to emerging markets, according to Kim.

“It is a positive factor for Korean and other emerging countries’ stock markets as increasing inflows to funds that buy emerging-market bonds could lead to a rebound in the currencies,” he said.

He said market conditions are providing a positive backdrop and the KOSPI’s price-earnings ratio remained at a “not-so-bad” level at 10.5 times projected earnings for the next 12 months.

By Park Han-na (hnpark@heraldcorp.com)