SEOUL, KOREA - Shinyoung Securities said on September 29 that steel stocks have become more attractive as they underwent excessive adjustment of late. It picked POSCO and Hyundai Steel as the most preferred stocks. For the fourth week of September, the stock prices of POSCO and Hyundai Steel declined 7.5 percent and 3.3 percent, respectively, largely due to profit taking by foreign investors and the unclear prospect for economic recovery.

 

Shinyoung Securities analyst Cho Gang-woon said, "As the steel product prices fell across the board in August, the spread between steel prices and iron ore prices has narrowed. But the spread is expected to improve as the iron ore supply has been excessive and the suppliers will have to lower their prices."

 

He expected the financial performance of major steel stocks in the third quarter would be strong. Despite the low spread among Chinese steel makers since late August, the third-quarter financial results of Korean steel suppliers will be steady. That's because there is always a time lag between international and domestic prices." He added, "The variables that must be paid attention for a while are the crude steel output in China and its inventory level. As Chinese makers are currently maintaining a high output level, one must be careful when inventory level rises."