[Good Morning Stock Market] Wuhan Pneumonia Hits the Market... Impact on Profit-Taking Desire

[Asia Economy Reporter Oh Joo-yeon] Ahead of the Chinese Lunar New Year, the spread of the novel coronavirus known as 'Wuhan pneumonia' is acting as a negative factor in global stock markets. With 540 infections and 17 deaths already reported in China alone, concerns are growing in the securities industry. However, some analyses suggest that if the situation does not escalate to the scale of the past SARS (Severe Acute Respiratory Syndrome) outbreak, the upward trend in stock prices, particularly in the semiconductor sector, is expected to continue.

◆ Sangyoung Seo, Kiwoom Securities Researcher = Yesterday, Asian markets including South Korea stabilized and showed strength after the Chinese government announced it would actively respond to Wuhan pneumonia. Additionally, positive remarks from Trump regarding the second phase of trade negotiations led related companies to lead the gains. Improved earnings from some companies also contributed to the rise.

Meanwhile, the European stock market declined due to Trump's remarks about imposing high tariffs on the EU, and although the US stock market showed strength, individual companies experienced increased daily volatility. The decline in international oil prices and increased volatility in some commodity prices such as natural gas are expected to act as factors dampening investor sentiment. Furthermore, related issues remain burdensome as the Chinese government announced a rapid increase in confirmed cases of Wuhan pneumonia, and Chinese state media reported travel suspensions to Wuhan and advised Wuhan residents not to leave the city without special reasons.

On the other hand, Tesla, which will announce earnings next week, hit an all-time high following a target price upgrade, and Intel, reporting earnings on Thursday, also showed strength after a target price increase. Apple’s rise was highlighted by expectations of increased sales of low-priced iPhones, indicating that investor sentiment toward related companies remains optimistic. However, most stocks are expected to undergo a correction process in the Korean stock market as profit-taking emerges, leading to either a surrender of gains or a shift to declines.

◆ Yonggu Kim, Hana Financial Investment Researcher = After the Lunar New Year holiday, the domestic stock market is expected to maintain a neutral price trend as it attempts to settle around the 2019 annual high level of the KOSPI 2250 mark.

Next week, market focus will likely be on changes in domestic and international news flow related to Wuhan pneumonia, along with the process of confirming Q4 2019 earnings variables in the domestic stock market. The infectiousness of Wuhan pneumonia is significantly lower than that of SARS, and its fatality rate is only about 2%, far below SARS’s 9.6% and MERS’s 39.5%.

The Q4 KOSPI operating profit consensus is 28.6 trillion KRW, expecting a 9.6% decrease compared to the previous year.

However, the current price and valuation environment have already priced in the risk of earnings decline, and the dispersion of earnings announcement timing due to annual performance confirmation, the concentration of Big-bath accounting in Q4, and the shift of market investor attention to 2020 earnings suggest the possibility of a Q4 earnings season development that is neutral or better.

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