South Korean stocks are expected to continue rangebound trading this week, as investors will likely keep a close watch over global markets amid a possible tapering of U.S. monetary easing, analysts said.

The benchmark Korea Composite Stock Price Index closed at 2,001.05 on Friday, up 1.3 percent from 1,973.45 the previous week. The main bourse got off to a strong start in the beginning of the week, breaching the psychologically important 2,000 mark on Wednesday, as the yen’s weakness stabilized and Washington released improved economic indicators.

But it failed to get a further boost toward the later part of the week, following analysts’ predictions here and abroad that the U.S. may squeeze the size of its quantitative easing.

Rising government bond yields in major countries added to fresh concerns, especially with those sold by Tokyo and Washington, as an increase in interest costs will spur volatility in stock markets.

“With no particular leads to fuel momentum here, it’s hard to expect the KOSPI alone to move upward if global liquidity dwindles due to the yield hike,” said Han Chi-hwan, an analyst at KDB Daewoo Securities Co.

However, analysts noted the return of foreigners to the local bourse should be counted as a positive signal, since increasing foreign demand in IT and auto blue-chips means investor confidence in the Korean economy is improving. Overseas investors scooped up a net 963.2 billion won last week as of Friday.

The direction of the KOSPI next week will largely hinge on results of the European Central Bank monetary meeting slated for Thursday and subsequent developments in U.S. Federal Reserve policy, analysts added.

Last week, construction companies, IT, machineries and chemicals were the biggest winners on the KOSPI, while defensive and domestic-related shares, including state-run energy suppliers and telecom companies, lost ground. (Yonhap News)