Kospi has bottomed out and may aim for 2500 next year: analysts

South Korea’s benchmark Kospi has tested its bottom at 1,910 this year and is strong enough to climb to as high as 2,500 next year, according to local analysts.

The Kospi outlook for 2020 by nine local brokerages averaged 2,177, according to industry sources Thursday. This was 77 points, or 3.66 percent, higher than the average index reading so far this year of 2,100.29.

Kospi finished Thursday up 0.01 percent from the previous session at 2,144.29.

The low-end average estimate (1,968) was 58 points higher than the annual low reported on Aug. 7. The upper-end average outlook (2,387) was up 138 points from the Apr. 16 annual high figure.

Meritz Securities Co. delivered the rosiest forecast, with an expected trading band of 2,000-2,500. Hana Financial Investment Co. followed with 2,000-2,450, trailed by Hanwha Investment & Securities Co. and Hyundai Motor Securities Co. at 2,000-2,350. IBK Securities Co. projected Kospi to trade in the 1,960-2,380 range, with KTB Investment & Securities Co. and Kiwoom Securities Co. giving a more conservative estimate of 1,900-2,300 and 1,900-2,250, respectively.

Reasons cited for next year’s optimist outlook were the possible resolution of the U.S.-China trade war, anticipated rebound in corporate earnings and the low-interest rate environment.

Analysts say U.S. President Donald Trump would be looking for a quick deal to end the bruising trade war with China if he wants to raise his chances for a second term next year. Beijing has also been under pressure to defuse the long-running trade dispute as U.S. tariffs have started to hurt its economy.

Korea’s listed companies are likely to do better in 2020. Meritz Securities estimated the net profit of Kospi-listed firms to fall about 35 percent this year but jump back 26 percent next year.

The ultra-low interest rate environment at home and abroad has also raised the appeal of dividend-paying stocks and other investments, analysts noted.

“Kospi’s dividend yield over the past 12 months averaged 2.1 percent, surpassing the yield on the 10-year government bond by 60 basis points,” said Hanwha Investment & Securities. “Stocks are expected to gain greater appeal, with interest rates at rock bottom.”

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