Gloom grips stock market outlook for 2016

Around this time, stock analysts unveil their forecasts for the next 12 months. Unfortunately, the prevalent outlook for the local bourse is pessimistic, contrary to those of the past few years.

Among major brokerage houses, KDB Daewoo Securities issued the gloomiest forecast. It said the Korea Stock Price Index (KOSPI) could fall as low as 1,700 points next year, its lowest since 2011 when it plunged because of a U.S. credit rating downgrade.

"There are fat chances a system risk would hit the market next year," said Kim Hak-kyun, chief of KDB Daewoo's investment strategy team. Kim cited the protracted slowdown of the Chinese economy, the currency crises in the BRICs countries of Russia and Brazil and massive restructuring of Korean industry as possible landmines that may bring down the national economy.

Other brokerage firms are also lowering their expectations. Asked about their respective KOSPI band, Hana Financial Investment forecast the index would move between 1,840 and 2,170, compared with NH Investment and Securities (1,850-2,150), IBK Investment and Securities (1,850-2,250), Samsung Securities (1,880-2,240), Hyundai Securities (1,900-2,250) and Shinyoung Securities (1,910-2,170).

Weighing down their outlooks were concerns about the continuing slump of major domestic enterprises, as seen by their poor corporate earnings, as well as the expected hike in the U.S. interest rate and a prolonged slowdown in the Chinese economy, industry sources said.

Not all forecasts were so dark, though. Shinhan Investment projected the KOSPI could go up to 2,300. "You need not equate the U.S. interest rate cuts to a liquidity squeeze," said Lee Kyung-soo, who heads Shinhan's investment strategy division. "An actual liquidity decrease will come in the first half of 2017, at the earliest, with the central banks of the EU and Japan continuing to inject more money into markets." Lee said domestic industrial restructuring could also work to upgrade the KOSPI valuation.