The benchmark KOSPI was expected to experience an extended rally for the next few months on a new round of capital inflows forthcoming in May, analysts said Monday amid forecasts that local stock markets would hold up well despite unfavorable external conditions.

“Foreigners are expected to continue their buying spree with renewed interest in the region. May is also the time when doubts about oil risk ease off and concerns about soaring oil will tone down by then,” said Jun Ji-won, a market analyst at Kiwoom Securities.

A survey of 2,000 institutional investors and hundreds of corporations by investment bank Credit Suisse said that capital inflow into emerging markets will resume in late May.

Upcoming announcements of corporate earnings were also expected to buoy investment sentiment, experts added. 

Reflecting the upbeat outlook, the KOSPI at one point during the morning session hit a historic high in what analysts said was a preview of the rally expected to come with a fresh round of capital inflow in the coming month.

“The KOSPI will continue to see foreign capital inflows and the record high reached in the morning will be part of a series of all-time highs in the process,” said Jun.

The KOSPI gained 0.6 percent last week despite foreign investors starting to sell for profit.

There had been lingering concerns that the stock market may take a hit from external factors, such as the sky-rocketing oil prices caused by political uncertainty in oil-producing regions.

Experts said an expected rate hike by the central bank in May isn’t likely to weigh on corporate earnings, meaning investment momentum will remain high.

“Economists largely expect the Bank of Korea to hike the benchmark interest rate in May but that would not weigh down on blue chips much because they have relatively less debt burden with ample cash reserves,” said Jun Min-kyoo, a macro-economist at the Korea Investment & Securities.

The BOK froze the benchmark interest rate at 3 percent in April, which followed a 0.25 percentage raise in March to tame inflation.

Contractors on Monday lost ground as their financing environment deteriorated due to soured project finance loans.

Foreign investors resumed selling builders and bank shares after pushing the KOSPI to a record high in the morning.

The benchmark Korea Composite index inched down 0.13 percent to 2137.72 after hitting an all-time high of 2149.45 in the morning.

By Cynthia J. Kim (cynthiak@heraldcorp.com)