Is in­vestor ap­petite for riskier as­sets re­cov­er­ing?

The Korea Times - - FINANCE - By Lee Kyung-min [email protected]­re­atimes.co.kr

In­vestor sen­ti­ment is show­ing signs of re­gain­ing its risk ap­petite buoyed by hopes of a trade deal be­tween the U.S. and China, re­duced no-deal Brexit con­cerns and the re­cent U.S. Fed­eral Re­serve rate cut, an­a­lysts said Thurs­day.

With more in­vestors turn­ing to high-risk, high-re­turn as­sets, the Korean stock mar­ket has also gained up­ward mo­men­tum. In con­trast, gold and the U.S. dol­lar, seen as safe haven as­sets, are los­ing their growth trend.

The bench­mark KOSPI has con­tin­ued on a bullish run ex­ceed­ing 2,100 points last Fri­day for the first time since Sept. 24, 2018, when it marked 2,101.04.

Gold, largely con­sid­ered a safe as­set along­side the U.S. dol­lar and Ja­panese yen, has edged up but it is still hold­ing within the $1,480-1,520 per ounce range seen for the last few days.

“It’s about time,” said Ky­obo Se­cu­ri­ties Re­search Cen­ter chief Kim Hy­oung-ry­oul.

“In­vestors have been risk-averse for quite a while. The U.S. eq­uity mar­ket, for ex­am­ple, is boom­ing and Korea is rather late to join the global move. The bullish sen­ti­ment is likely to con­tinue for some time.” he added.

The re­sumed, al­beit tran­sient, hopes on the pos­si­bil­ity of the U.S. and China reach­ing a trade deal were enough of a trig­ger to move the mar­ket, ac­cord­ing to Eric Lee, chief strate­gist at Daishin Se­cu­ri­ties.

“The re­turned risk ap­petite was mostly led by the U.S. trade of­fi­cials’ pos­i­tive out­look on the deal. In­vestors deem over­all un­cer­tain­ties have sub­stan­tially cleared,” Kim said. The trade of­fi­cials in­di­cated that a deal with China could be signed in Novem­ber, with U.S. Com­merce

Sec­re­tary Wil­bur Ross say­ing that li­censes for U.S. com­pa­nies to sell com­po­nents to Huawei Tech­nolo­gies would come “very shortly.”

The series of un­cer­tainty-re­duc­ing news was helped fur­ther by the bet­ter-than-ex­pected U.S. job data as well as the Fed rate cut, Lee added.

The In­sti­tute for Sup­ply Man­age­ment’s (ISM) Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex (PMI) came in at 48.3 in Oc­to­ber, a fig­ure that drew some sighs of re­lief given the be­low-ex­pec­ta­tion read­ing was still above Septem­ber’s.

KB Se­cu­ri­ties chief econ­o­mist Chang Jae-chul said the volatile sen­ti­ment could lose steam de­pend­ing on up­com­ing eco­nomic in­dices and specifics on any trade deal.

“Ex­pec­ta­tions are one thing, and the ac­tual fig­ures are quite an­other,” Chang said. “We may have to brace for a sud­den turn of events if bad news makes the head­lines. The same goes with a trade deal. It re­mains to be seen whether the Korean cur­rency will con­tinue to stay strong un­til the end of year,” he added.

Mauro F. Guillen, di­rec­tor of the Lauder In­sti­tute at the Uni­ver­sity of Penn­syl­va­nia’s Whar­ton School cau­tioned that the cur­rent chase for re­turns could be short-lived.

“In­vestors are not crazy risky, how­ever. It’s too early to tell if emerg­ing mar­kets will ben­e­fit given Ar­gentina, Tur­key and China fears. Korea could at­tract more if it re­forms,” he said.

An­to­nio Fatas, an eco­nomics pro­fes­sor at INSEAD, agreed, say­ing it was too “early to call vic­tory.”

“Lots of un­cer­tain­ties re­main. A re­duc­tion in risk and un­cer­tainty and, in gen­eral, op­ti­mism about growth is good news for every­one in­clud­ing Korea. Some good news over the last days but still a long way to go to con­firm that the worst is be­hind us,” he said.

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