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POLL-S.Korea KOSPI shares seen rising 18 pct to end-2011

Published 03/24/2011, 10:16 AM
Updated 03/24/2011, 10:20 AM
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* KOSPI seen extending gains to as high as 2,400 by end-2011

* Middle East unrest, inflationary pressure to weigh

* Energy, chemicals, techs seen outperforming

By Jungyoun Park and Ye-rim Kim

SEOUL, March 24 (Reuters) - South Korea's key share index is seen gaining about 18 percent through to the end of this year, with ongoing global uncertainties including unrest in the Middle East offsetting positive earnings, a Reuters poll found.

The benchmark Korea Composite Stock Price Index was seen at 2,400 by the end of December, up 17.8 percent from its Thursday close of 2,036.78, according to the median forecast of 11 strategists whose estimates ranged from 2,200-2,700.

The increase would indicate a more modest 17 percent gain for the year compared with the KOSPI's 21.9 percent surge in 2010 but the forecast is little changed from a 2,385 prediction in a December poll.

For mid-2011 strategists saw 2,150 points, a 5.6 percent gain from here.

If oil prices remain above $100 per barrel for an extended period amid Middle East turmoil, a lot of Seoul-listed companies' earnings would suffer, said Eom Tae-woong, an analyst at Bookook Securities.

South Korea is the world's fifth-largest crude oil importer.

Foreign investors were net sellers of 4.3 trillion won ($4.13 billion) so far this year, after buying a total of 21.6 trillion won during 2010.

The selloff was due to weakening appetite for riskier assets and profit-taking moves.

ENERGY BOOST

Many strategists, polled over the past week, picked energy, chemicals, and technology plays as the likely outperformers.

LG Chem and SK Innovation were among the preferred issues as they were set to benefit from robust demand in China for energy and chemical products and supply cut from Japan after the quake.

Shares in SK Innovation have risen more than 20 percent so far this month, while the broader KOSPI has edged up a mere 5 percent.

Shares in LG Chem, a rechargeable battery maker, have gained 11.6 percent, and Honam Petrochemical, its sector peer, surged 22.2 percent.

The financial sector including banking and insurers were also seen better off as banks' allowance for bad debts steadily dip and the monetary environment grows tighter.

South Korea's central bank raised interest rates in March and hinted that further policy tightening would be gradual.

But domestic consumption issues, most namely retailers, may suffer, hurt by rising inflationary pressure in Asia's No.4 economy, according to Juhn Chong-kyu, a senior analyst at Samsung Securities.

Last week, South Korea's bank chief called for "multi-pronged" policy responses to contain inflation expectations, saying that price stability was the greatest challenge facing the country.

($1=1040.8 Won) (Editing by Jon Loades-Carter)

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