[Good Morning Stock Market] "Despite US Stock Market Highs, Market Volatility Remains"

On the 9th, foreign tourists wearing masks are passing in front of the COVID-19 screening clinic installed in the Myeongdong shopping street in Seoul. Photo by Dongju Yoon doso7@

[Asia Economy Reporter Kum Boryeong] Despite increased volatility due to the novel coronavirus infection (Wuhan pneumonia), the U.S. stock market is reaching new highs. This is analyzed as a result of a combination of bottom recognition, fundamental improvement momentum, and liquidity. However, the possibility of increased market volatility originating from China still remains. In the case of the KOSPI, it has recovered to the 2200 level, but the upward momentum appears to be somewhat slowing down.

◆ Kim Seonghwan, Researcher at Shinhan Financial Investment = The U.S. stock market has recovered, but concerns about the Chinese economy leave room for volatility.

The Q4 earnings season has been better than expected. Especially, the earnings trend of the leading sector, IT, is nearly perfect. 89% of IT companies have exceeded EPS estimates, and the combined EPS surpasses expectations by 9.1%. The strength of the Nasdaq and tech stocks reflects this. Real economy momentum is rising. With solid employment and consumption, and the ISM manufacturing index escaping contraction, expectations for manufacturing recovery are forming. The U.S. economic surprise index reached 45.4, the highest level since early 2018. Due to China’s swift monetary policy response, the Chinese stock market stabilized quickly. The People’s Bank of China supplied 1.12 trillion yuan in liquidity last week as a response to stimulate the economy amid the novel coronavirus, and at the February monetary policy meeting, hinted at lowering the LPR.

Despite the stock price rebound, concerns about demand from China persist. Estimates of economic damage are still in the early stages and are based on various spread scenarios. The lifting of the lockdown in Hubei Province, industrial activity across China, and recovery of global travel demand are likely to resume once the spread significantly slows. Ultimately, the final damage is difficult to predict until the final outlines of confirmed cases and deaths are clear. It is also premature to say that the consensus on China’s growth rate has fully adjusted downward.

◆ Jo Byunghyun, Researcher at Yuanta Securities = The outbreak of the novel coronavirus in January acted as a sudden negative shock, causing a sharp drop in the stock market. Although there is economic impact, a learning effect that the shock may be limited to within a quarter and expectations for policy support have led to a recovery from the shock. However, the KOSPI, which has recovered to the 2200 level, shows somewhat weakened upward momentum. At least in the short term, it seems difficult to raise the level further. This is because there are no clear driving factors for the rise in terms of macro momentum, risk appetite, and foreign investor demand.

First, looking at the global economic surprise index from the macro momentum perspective, the level itself is quite high, and a correction of the China economic surprise index, which led the rise in global indices from year-end to early this year, is expected. Therefore, a slowdown in upward momentum seems inevitable for the time being. It is necessary to check the extent of adjustment in indicators such as the PMI at the end of the month. While China’s economic momentum is weakening, as recently confirmed, the relatively rapid recovery of U.S. economic momentum is difficult to interpret positively in the short term. Of course, the fact that final demand in the U.S. remains alive is very positive in the mid-to-long term, but the U.S. momentum recovery occurring amid diminished expectations for the Chinese economy can act as a negative factor for the domestic stock market in the short term from a relative momentum perspective.

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