[Weekly Market Outlook] KOSPI, Growing Expectations for Full Recovery from 'New Coronavirus' Shock

[Asia Economy Reporter Ji-hwan Park] This week (February 10-14), the domestic stock market is expected to somewhat recover from the shock of the novel coronavirus infection (COVID-19). In particular, the KOSPI is anticipated to shift into an upward trend, supported by the U.S. economic recovery and expectations for China's domestic demand stimulus policies.

According to the Korea Exchange on the 9th, last week the KOSPI closed at 2,211.95, up 4.39% from the previous week. The KOSDAQ also rose 4.69% to 672.63 points. In the case of the KOSPI, institutional investors showed a strong selling trend, offloading 1.3891 trillion won last week. Conversely, individual and foreign investors bought 457.6 billion won and 818.1 billion won respectively, driving the index upward. For the KOSDAQ, institutions sold 183.8 billion won, but individuals and foreigners purchased 123.2 billion won and 83 billion won respectively.

The domestic stock market is stabilizing faster compared to the 2003 SARS outbreak. Byung-yeon Kim, a researcher at NH Investment & Securities, said, "Uncertainty related to the novel coronavirus is rapidly being resolved," adding, "The global leading economic index bottoming out and rebounding at that time is similar to the current situation."

News of China reducing U.S. tariffs is also a positive factor for the index rise. The Tariff Commission of the State Council of China decided to halve tariffs on $75 billion worth of U.S. imports starting from the 14th. The existing 10% tariff on U.S. products will be reduced to 5%, and the 5% tariff will be lowered to 2.5%.

In addition to this tariff reduction, China is rolling out various stimulus measures such as regional infrastructure investment, corporate tax cuts, loan support for companies affected by COVID-19, and raising the threshold for personal income tax collection.

Moreover, the U.S. January employment data released last week showed positive results, increasing the likelihood of a global economic recovery centered on the U.S. If this continues, the domestic stock market is expected to rebound from its recent slump, with semiconductor and other leading stocks driving the price increase.

The securities industry forecasts that the KOSPI will move between 2,190 and 2,260 points this week. They cited continued liquidity supply by the Federal Reserve (Fed), expectations for China's stimulus measures, and improvements in U.S. employment as key factors for the rise. However, short-term rapid rebounds, coronavirus fears, and concerns over Samsung Electronics' first-quarter earnings slowdown are expected to act as downward pressures.

Byung-yeon Kim of NH Investment & Securities emphasized, "The domestic stock market has approached the 2,240 level, which was the index range before concerns about the novel coronavirus," adding, "The critical point for the spread of the virus is expected to be around the 10th, with most deaths limited to regions within China. Due to proactive responses not only by the Chinese government but also by the private sector, the possibility of containment is high." Kim added, "Considering improvements in U.S. manufacturing and expectations for China's stimulus, although there will be a short-term pause following a V-shaped rebound, the upward trend will continue."

The options expiration date scheduled for the 13th is also a noteworthy variable. Usually, on options expiration days, volatility increases depending on foreign investors' futures trading trends. Yong-gu Kim, a researcher at Hana Financial Investment, explained, "The key variable is the change in supply and demand for February options expiration scheduled on the 13th," adding, "As of the 6th, the 20-day cumulative net buying trend of foreign investors in KOSPI 200 index futures sharply turned into net selling by 24,501 contracts, reflecting psychological anxiety over the Wuhan pneumonia outbreak materializing as a sell hedge."

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