Capital Research Institute "This Year's Economic Growth Rate 2.2%... KOSPI Listed Companies' Operating Profit Up 29%"

[Asia Economy Reporter Oh Ju-yeon] The Korea Capital Market Institute projected the domestic economic growth rate for this year at 2.2%. It analyzed that there will be a gradual recovery starting from the first half of the year. Additionally, it expected the operating profit of KOSPI-listed companies to increase by 29% compared to last year.

On the 29th, the Korea Capital Market Institute held a seminar titled '2020 Capital Market Outlook and Policy Directions' at the Financial Investment Center building in Yeouido, Seoul, and presented these forecasts.

Kang Hyun-joo, Head of the Macroeconomic and Financial Research Division at the Korea Capital Market Institute, said, "The domestic economy will pass its bottom in the first half of this year," adding, "Despite improvements in exports and facility investment, consumption and construction investment remain sluggish, so the growth rate will gradually recover to 2.2%."

He analyzed, "This downturn phase is expected to last for 10 to 11 quarters, which is longer than the average contraction period of 6 quarters." Regarding warnings from some quarters about the possibility of growth rates in the 1% range due to continued sluggish private consumption, he forecasted, "Considering the government's efforts to expand income support, increased real purchasing power due to low inflation, recent signs of improved consumer sentiment, and the increase in foreign visitors to Korea, a sharp slowdown is unlikely."

Regarding monetary policy, it was forecasted that both the U.S. Federal Reserve (Fed) and the Bank of Korea will keep their benchmark interest rates unchanged this year. Despite real economy factors, given the government's determination to stabilize real estate prices and the Bank of Korea's concerns about financial stability, it is highly likely that the current benchmark interest rate of 1.25% will be maintained.

The operating profit of KOSPI-listed companies this year is expected to improve by 29% compared to last year.

Kim Jun-seok, Head of the Capital Market Division at the Korea Capital Market Institute, said, "The profitability of listed companies will improve this year," and projected, "Operating profit is expected to reach 159 trillion won, a 29% increase compared to the 2019 forecast of 123 trillion won."

By investor type, it was explained that foreign investors are expected to maintain a net buying trend. Kim said, "Since the U.S. economy is expected to remain in an expansion phase and Korea will pass its bottom, net buying by foreign investors is expected to increase."

On the other hand, the trend of slowing net buying by institutional investors is expected to continue. Despite the increase in the National Pension Service's asset size, the net buying scale of domestic stocks has shrunk due to the trend of expanding overseas stock allocation, and the investment demand for mutual funds and private equity funds, excluding exchange-traded funds (ETFs), has become entrenched in a slump.

Kim added, "As Samsung Electronics' influence on the KOSPI expands, there is a possibility that its impact will be amplified by Samsung Electronics' improved performance and foreign investors' net buying."