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Korea investors hope for poll sweeteners

SEOUL: South Korea counts down to a general election this week and investors are hoping the government will tantalise them with market-boosting steps ahead of Thursday's poll.

Talk the government might announce market sweeteners helped drive up the benchmark index and the over-the-counter market on Friday and analysts said the strong buying could continue into this week.

"Expectations of stock-boosting measures were factored into Friday's rally on the main exchange," said Keum Hye-yoon, a senior strategist at Hannuri Securities.

"There was talk on the Internet by some investors that such measures might be on the way," said Keum.

One of the steps analysts mentioned was allowing investment trust companies, which are big market players, to extend by another year the one-year funds that are close to expiring now.

Investment trust companies have been pressured to unload shares of late to shore up cash to meet redemptions on equity-linked beneficiary certificates in the funds they manage.

Under the current law, all funds must be liquidated upon expiration and cannot be extended.

Many of the one-year funds managed by the investment trust companies were launched last March and April.

But if this measure or others don't materialise, the main board could take a beating on disappointment sales, Keum said.

The Kosdaq over-the-counter market will largely move in step with the tech-heavy Nasdaq composite index, analysts said.

"On the whole, the Nasdaq's movement will dictate the direction of the local OTC market," said Lee Yong-mok, a Kosdaq specialist at Daewoo Securities.

Buoyed by strong gains on technology stocks, the Nasdaq composite index closed up 4.19 percent, or 178.89 points at 4,446.45 on Friday.

Samsung Electronics, which represents 19 percent of total capitalisation, soared on Friday and its shares could again lead the way, they said.

The world's largest memory chip maker rose 7.78 percent to 360,000 won on Friday, driving the electronics sub-index up 6.41 percent.

"With volatility in tech shares and general weakness in large cap financial sectors, electronics sectors are seen leading the market," said Kim Dae-jung, a strategist at SK Securities.

Strength of telecoms and chip makers pushed the Korea Composite Stock Price Index (Kospi) up 33.03 points or 4.11 percent to end at 837.38 on Friday.

It fell 2.7 percent for the week.

Analysts expected the KOSPI to range between 800 and 850 points this week.

Also crucial for the market were the 40,000 April put option contracts held by foreign investors, they said.

The options expire on Wednesday and could dent the main exchange if any options-linked sales emerge, they said.

Foreign investors bought a net 164.8 billion won worth of shares on Friday but some analysts believe they might turn net sellers early next week to drive down spot prices.

June KOSPI 200 futures closed up 3.4 points at 106.70 on Friday, while the underlying KOSPI 200 spot index was up 4.42 points at 105.83.

The Kosdaq market on Friday rose sharply, up 7.66 percent to 205.97, ending a seven-session slide during which OTC shares fell almost 21 percent.

It fell 6.9 percent on the week.

But high-flying tech shares with intrinsic value as well as growth potential should sustain upward momentum, analysts said.

Serome Technology, an Internet service provider, closed up 12 percent at 54,700 on Friday.

Handysoft, a software developer, was also limit up, ending at 52,300.-Reuters