[2020 Financial Weather Forecast] KOSPI to Show High Start and Low Finish This Year... Variables Include US Presidential Election and Trade Negotiations

Research Center Director's Outlook
Progress in US-China Trade Talks, Global Economy Bottom Signal, Domestic Companies' Profit Increase
Positive for Stock Prices. Q2 Expected to Hit Annual Peak

[Asia Economy Reporter Song Hwajeong] Securities firms forecast that the KOSPI will move within the range of 1830 to 2500 next year. They expect that domestic and U.S. elections will act as either risks or opportunities for the stock market this year, and the U.S.-China trade dispute will continue to affect the domestic stock market. In particular, the semiconductor and IT sectors are expected to be promising.

On the 3rd, Asia Economy surveyed heads of research centers at securities firms about this year's expected KOSPI band, finding the average low point at 1950 points and the average high point at 2386 points. The overall trend is expected to show a "high at the top and low at the bottom" pattern.

Choi Seokwon, head of SK Securities Research Center, said, "While U.S.-China trade negotiations are progressing, there are faint signs of a bottom in the global economy," adding, "This is expected to lead to increased profits for domestic companies and will have a positive impact on stock prices at least until the first half of the year." Yoon Chanyong, head of Shinhan Financial Investment Research Center, stated, "This year, the KOSPI is expected to move between 2000 and 2400 points," and "There is a high possibility that the annual high will be confirmed in the second quarter."

Variables expected to influence this year's stock market include the progress of U.S.-China trade negotiations, domestic general elections and the U.S. presidential election, and economic stimulus measures. In particular, the U.S. presidential election is seen as both a risk factor due to uncertainty and an opportunity. Lee Kyungsoo, head of Meritz Securities Research Center, said, "The uncertainty of the U.S. presidential election will be a variable," and analyzed, "Unexpected policy cards such as tax cuts and deregulation for President Donald Trump's re-election cannot be ruled out." He added, "Timing-wise, election uncertainty may be reflected earlier in the first half rather than the second half, as the Democratic primary begins in February and the leading Democratic candidate will be determined during that process."

Policies of various countries are also expected to be both risk and opportunity factors. Strong pro-market policies introduced by President Trump ahead of the U.S. presidential election are expected to be opportunities, and domestically, early implementation of economic stimulus measures following the April general election and whether China implements stimulus measures are expected to positively affect the stock market. However, the possibility that stimulus measures could lead to economic slowdown next year was cited as a risk.

Choi said, "Despite escaping the economic bottom zone, due to structural factors such as high household debt burden, continued protectionism in various countries, weakening growth potential of domestic manufacturing, and a decrease in the economically active population, domestic economic growth is expected to remain in the low 2% range," and pointed out, "Especially in the second half, economic expansion driven by policy efforts may lead to economic slowdown next year, so caution is needed." Jang Hwatak, head of DB Financial Investment Research Center, also said, "The counter-effects of excessive policies mainly implemented in advanced countries during the past period could act as variables."

The U.S.-China trade negotiations are also seen as a variable mixing both risks and opportunities. If negotiations progress, it will be an opportunity, but the possibility of intensified disputes cannot be ruled out.

By industry, semiconductors and IT, which are expected to see improved business conditions and earnings this year, are forecasted to show favorable trends. Yoon Heedo, head of Korea Investment & Securities Research Center, said, "The IT sector, expected to have the largest base effect, and the turnaround-expected utility and content sectors will be promising," adding, "For IT, recovery across the supply chain due to demand for 5th generation (5G) mobile communications and devices, for utilities, a turnaround due to government policy changes such as Korea Electric Power Corporation, and for content, increased demand due to the spread of 5G and foldable displays and the launch of new online video services (OTT) are expected, which is positive."

Shin Dongjun and Yoo Seungchan, heads of KB Securities Research Center, diagnosed, "While the core intermediate goods for infrastructure investment in the 2000s were materials and industrial goods, the core intermediate goods for the 4th Industrial Revolution investment are semiconductors," and said, "If U.S. investment rebounds, the Korean semiconductor industry will also improve."

Improvement in the IT business environment is also positive for materials, parts, and equipment (so-bu-jang). Choi said, "For so-bu-jang, government support is expected to continue under global protectionism," emphasizing, "Although there are Japan's export restrictions, the government considers strengthening the competitiveness of so-bu-jang as an important point in changing the industrial structure, and if the semiconductor and IT business environment recovers this year, investment in this sector may also increase."

This content was produced with the assistance of AI translation services.