[Weekly Market Outlook] KOSPI Falls Below 2000 Level... "Could Be a Buying Opportunity"

On the 28th, as concerns about the global spread of the novel coronavirus infection (COVID-19) intensified, the KOSPI plunged below the 2000 mark at the Hana Bank dealing room in Euljiro, Jung-gu, Seoul. (Photo by Yonhap News)

[Asia Economy Reporter Kum Boryeong] It is forecasted that anxiety due to the novel coronavirus infection (COVID-19) situation will continue into the first week of March. However, some analyses suggest that this moment, when the KOSPI index has fallen below 2000, could be an opportunity for bargain buying.

According to the Korea Exchange on the 1st, the KOSPI index dropped more than 8% within a week, from 2162.84 on the 21st to 1987.01 on the 28th. This was due to concerns over the spread of COVID-19.

However, as the KOSPI fell below 2000, some experts are advising bargain buying. Hyunsoo Kwak, a researcher at Shinhan Financial Investment, explained, "The KOSPI band is expected to be 2000?2400 if the situation ends within the first quarter, and 1900?2250 if the situation prolongs. In any scenario, buying below 2100 is a valid response. I recommend focusing on IT-centered stocks, especially semiconductors, which have been the leading stocks. I still believe the current market is a reproduction of the late 1990s bull market. The virus will eventually be controlled."

Although anxiety due to COVID-19 will continue in the first week of March, there is also a forecast that the easing of overvaluation pressure on the U.S. stock market will act as a positive change. Younggyo Yoon, a researcher at Cape Investment & Securities, emphasized, "It is necessary to pay attention to the fact that employment recovery in the manufacturing sector, especially in construction, is being confirmed amid a solid recovery in U.S. consumer indicators. The recovery in manufacturing employment is expected to lead, with a time lag, to increased consumption and corporate profits, which will ease the overvaluation pressure on the U.S. stock market. Through this adjustment, the holders of large IT stocks are expected to change, and the shift in market-leading stocks will accelerate. Despite the COVID-19 situation, bargain buying should focus on sectors where earnings forecasts have been revised upward and, paradoxically, sectors directly affected by COVID-19 where earnings forecasts have been revised downward." Yoon recommended semiconductors, automobiles, and China-related consumer goods as sectors to consider.

Seungjin Shin, a researcher at Samsung Securities, also stated, "The KOSPI is trading below a 12-month forward P/B ratio of 0.8, highlighting its price attractiveness, but investor psychological anxiety is still ongoing. However, considering that U.S. Treasury yields have fallen to record lows reflecting more than two rate cuts, and that the Korean won is not weakening as it usually does during foreign selling, it is necessary to respond with bargain buying at the current point below 2000 on the KOSPI. If a rebound occurs, it is highly likely that large-cap companies will lead the rally. In the phase where liquidity is flowing back in, it is advisable to target IT, bio, and electric vehicle sectors that can benefit, and also consider buying stocks benefiting from lifestyle changes brought about by COVID-19 as a good alternative."

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