[Good Morning Stock Market] 'Concerns Become Reality' COVID-19 Spreading Worldwide... What Is the Outlook for the Domestic Stock Market?

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] The spread of the novel coronavirus infection (COVID-19) is expanding worldwide. While the number of new COVID-19 cases in South Korea has peaked and is showing signs of stabilization, cases are simultaneously surging overseas in the United States, Europe, and other regions. On the 9th (local time), the US CNN network classified the COVID-19 outbreak as a "pandemic" (global epidemic).

The global stock markets are also shaking. On this day, the New York Stock Exchange experienced its worst plunge since the 2008 financial crisis. During the trading session, the sharp drop in stock prices triggered a circuit breaker for the first time since 1997, temporarily halting trading. Although increased volatility in the domestic stock market is inevitable for the time being, since it has already undergone significant adjustments ahead of global markets, the scale of further corrections is expected to be limited. Therefore, there is an analysis that it is necessary to approach the market from the perspective of seeking a bottom.

◆ Lee Changhwan, Hyundai Motor Securities Researcher = As concerns over the COVID-19 pandemic have grown, financial market volatility has expanded significantly. Analyzing seven KOSPI downturn phases since 2008, first, there was a rebound due to policy responses such as interest rate cuts and quantitative easing. Second, after valuations fell by a certain level (15-20%), a rebound from the bottom was successful. At this point, it is judged that the bottom is not far away. First, looking at the trend of increasing COVID-19 cases, there is sufficient possibility of stabilization. Also, the US has cut interest rates, and South Korea is also responding with policy measures such as supplementary budgets. The KOSPI’s 12-month forward PER and PBR have fallen to 9.9 times and 0.76 times, respectively, reaching the bottom in this phase. Having adjusted about -13.9% and -13.6% from the peak, there is little room left for further decline compared to past cases. In particular, the PBR has fallen to the lowest level since the financial crisis (lowest 0.76 times) and 2019 (lowest 0.76 times). Therefore, it is judged that a split buying strategy will be effective if additional adjustments occur below 1950 points on the KOSPI.

◆ Cho Byunghyun, Yuanta Securities Researcher = It is necessary to approach the market from the perspective that extreme volatility will continue at least until the Federal Open Market Committee (FOMC) meeting. However, considering the recent decline in the KOSPI, it appears to be at a level that can be given significance. Since the previous high (February 14), the KOSPI has fallen by -12.9% over 16 trading days. During the same period, such a level of decline was only recorded during the 2008 global financial crisis, the 2011 US credit rating downgrade, and around October last year. Considering the active policy coordination by the Federal Reserve and other regional central banks, and the fact that the real economy is not yet in as severe a contraction as during the financial crisis, there is a possibility of response through both monetary and fiscal policies. Therefore, it is necessary to approach the market from the perspective of seeking a bottom.

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