[COVID-19 Urgent Market Outlook] "COVID Market Different from 2008 Crisis, Future Uncertain"

Different Causes Require Different Responses
Vaccine Development and Case Reduction Needed
Fear Persists... Time Is the Answer

Experts Unite: "Unpredictable"
Need Supplementary Measures Beyond Monetary Policy

[Asia Economy Reporters Oh Ju-yeon, Geum Bo-ryeong, Lee Min-woo] As the global stock markets plunged into panic due to the novel coronavirus infection (COVID-19) pandemic, countries have tried to contain it, but all efforts have proven ineffective. Economic and stock market experts say that although the stock market crash situation is similar to the 2008 financial crisis, the causes are different, so responding in the same way is unlikely to be effective. In particular, the current COVID-19 fear is expected to continue until a vaccine or treatment is developed, or until the number of confirmed cases worldwide decreases, so any policy measures will inevitably have limitations. Ultimately, experts agree that "time is the answer."

On the 17th, Asia Economy conducted a survey of heads of research centers at securities firms and economic experts regarding the "Emergency Stock Market Outlook for COVID-19." They unanimously said, "It is unpredictable." They explained that as long as the COVID-19 situation is unresolved, any forecasts regarding economic growth rates or stock market trends are meaningless at this time. Given that stock market declines have not calmed despite countries implementing unprecedented monetary policies, this trend is expected to continue for the time being.

Kim Yoo-gyeom, head of the research center at Cape Investment & Securities, said, "No matter what policy response is introduced now, COVID-19 must be resolved first. Market anxiety will continue as long as the number of confirmed cases does not stabilize in the U.S. or Europe."

The particular problem is that COVID-19 is spreading like dominoes. Professor Ahn Dong-hyun of Seoul National University pointed out, "If all countries had experienced outbreaks simultaneously, the stabilization phase could have been predicted with some direction, but because it is spreading like dominoes, it is unclear how far and how long the damage will last." He analyzed that while the initial outbreak in China was a problem of global 'supply chain contraction,' the situation worsened as it spread to the U.S. and Europe, causing the global 'consumer market' to collapse.

Professor Ahn said, "The U.S. and Europe, which account for 70% of the global consumer market, are taking strong measures such as closing borders, which means global supply and demand are breaking down. In this situation, reintroducing the monetary policies used during the 2008 financial crisis may not be a significant solution."

Kang Hyun-joo, head of the macro-finance division at the Korea Capital Market Institute, said, "During the financial crisis, the problem was the transmission of vulnerabilities from households to financial institutions, but now the focus has shifted from households to companies struggling due to the COVID-19 crisis." She assessed, "In this real economy crisis, supporting corporate liquidity seems necessary." Kang emphasized, "Countries, including Korea, need to introduce supplementary measures beyond monetary policy to help companies survive the worst situations caused by months of halted operations without relief."

The Korea Capital Market Institute had projected a 2.2% domestic economic growth rate at the beginning of this year and expected operating profits of KOSPI-listed companies to increase by 29% year-on-year, but these forecasts now require significant revision. Kang said, "External conditions are changing weekly, making it impossible to make reliable forecasts. Only when the pattern of the epidemic becomes clearer can predictions be made."

Heads of securities firms' research centers called for full-scale fiscal policy to restore the stock market. Kim Yoo-gyeom of Cape Investment & Securities said, "Central banks can respond on the corporate side but have difficulty addressing demand. Since normal consumption activities are currently impossible, domestic supplementary budgets need to be expanded more aggressively."

Shin Ji-yoon, head of the research center at KTB Investment & Securities, also said, "Attempts to stabilize the economy through monetary and fiscal policies are natural," but added, "The problem is that these are unlikely to be fundamental solutions to the epidemic."

They also emphasized that the circulation of funds is as important as liquidity supply. Professor Ahn said, "Even if money is injected into the market, a 'multiplier effect' must occur, but currently, due to 'social distancing,' everything is at a standstill. This must be resolved for fiscal policy effects to be realized." The same applies to companies. Kim Hyung-ryul, head of the research center at Kyobo Securities, said, "Ironically, even with zero interest rates, money is drying up. Incentives are needed to encourage companies to release funds, and this card must be played quickly for the market to stabilize."

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