[Weekly Market Outlook] Unstable Trends Due to 'Wuhan Pneumonia'... "Impact Will Be Limited"

On the last day of the Lunar New Year holiday, the 27th, the fourth confirmed case of the novel coronavirus infection (Wuhan pneumonia) was reported in South Korea. On this day, tourists wearing masks are enjoying their time at Gyeongbokgung Palace in Seoul.
Photo by Moon Honam munonam@

[Asia Economy Reporter Kum Boryeong] As confirmed cases of the novel coronavirus infection, commonly known as 'Wuhan pneumonia,' have emerged worldwide, the related situation is becoming increasingly serious. With growing concerns over the spread of Wuhan pneumonia, the financial markets are expected to show unstable trends.

On the 27th, the Japanese stock market closed the morning session in a downward trend. The Nikkei 225 index ended the morning session at 23,372.06, down 1.91% compared to the previous close. This is analyzed to be due to a sell-off amid weakened investor sentiment caused by the spread of Wuhan pneumonia.

The New York stock market is also expected to show instability this week. Similar to the past Severe Acute Respiratory Syndrome (SARS) outbreak, if the Chinese economy suffers a significant impact, investor sentiment in the global financial markets could be suppressed.

However, the first FOMC meeting of the year, scheduled for the 28th-29th, is one of the variables. Since the U.S. Federal Reserve (Fed) has strongly indicated that it will keep interest rates unchanged this year, there is little expectation of policy changes, but market expectations could shift depending on Chairman Jerome Powell’s assessment of the economy and inflation.

Experts analyze that while Wuhan pneumonia will have some impact domestically, it is not a cause for major concern. Kim Yonggu, a researcher at Hana Financial Investment, said, "This week, the market focus is expected to be on changes in domestic and international news flow related to Wuhan pneumonia, along with the process of confirming the performance variables of the domestic stock market in the fourth quarter of last year." He added, "According to the Korea Centers for Disease Control and Prevention’s investigation, the transmissibility of this Wuhan pneumonia is significantly lower than that of SARS, and the fatality rate is only about 2%, far below SARS’s 9.6% and Middle East Respiratory Syndrome (MERS) 39.5%. This means it is just an unsettling noise and not an unprecedented shock variable that would cause a disruptive change in the market."

Hainhwan Meritz Securities researcher also said, "The impact on the domestic stock market is expected to be limited depending on the development of the Wuhan pneumonia situation. Looking at past cases of SARS and MERS, after a temporary stock price fluctuation on the D-Day, the market quickly stabilized." He added, "Rather, this issue is more related to a change in style. Recently, the themes leading the domestic stock market were IT, secondary batteries, and Chinese consumption-related stocks (cosmetics, duty-free shops). Considering that tourism and consumption contraction could affect these, it suggests that the relative underperformance of Chinese consumption-related stocks is likely to continue."

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