South Korean stocks are expected to trade in a narrow range this as investors step to the sidelines amid a lack of upward momentum and signs of a slowdown in the U.S. economy, analysts said Saturday.

The benchmark Korea Composite Stock Price Index (KOSPI) closed last week at 2,046.67, down 3.16 percent from a week earlier.

The KOSPI got off to a weak start at the beginning of the weak, as downbeat job and manufacturing data from the United States dented investor appetite. Mounting concerns over a possible recession in the world’s No. 1 economy and a surprise rate hike by the Bank of Korea (BOK) drove the broader index further down.

The BOK on Friday raised the key interest rate by a quarter percentage point to 3.25 percent to clamp down on persistent inflationary pressure. The move came as a surprise after it was widely expected that the central bank would freeze the base rate amid economic uncertainties abroad.

Foreigners were net sellers of 384.3 billion won (US$355 million), and institutions unleashed holdings worth 300 billion won. In contrast, retail investors snapped up shares worth 1.4 trillion won.

Analysts said the KOSPI is expected to be range-bound this week on continued worries over the U.S. economic recovery and an absence of upward momentum.

They also said investors are likely to refrain from trading ahead of big events in the coming weeks.

“Investors are likely to step to the sidelines ahead of major events in two weeks time ― such as the meeting of European Union finance ministers and the U.S. Federal Open Market Committee. Eyes will also be on whether South Korea can make it into the MSCI developed market indices,” said Kwak Joong-bo, an analyst at Samsung Securities Co.

Meanwhile, analysts forecast that the negative impact of the BOK’s unexpected rate hike will be short-lived. 

(Yonhap News)