KOFIA and Heads of Research Centers at 8 Securities Firms Expect Stock Market Recovery in Second Half of the Year

[Asia Economy Reporter Oh Ju-yeon] The Korea Financial Investment Association held a meeting (teleconference) last week with research center heads from eight securities firms to analyze the current domestic and international stock market situation amid the global spread of the novel coronavirus infection (COVID-19) and to share opinions on future market outlooks, the association announced on the 13th.

The meeting included research center heads from Mirae Asset Daewoo, NH Investment & Securities, Korea Investment & Securities, Samsung Securities, KB Securities, Shinhan Financial Investment, Hana Financial Investment, and Meritz Securities.

They agreed that although there are uncertainties in the capital market due to the impact of COVID-19, the market is expected to recover from the second half of this year based on policy effects and expanded consumer demand.

Yoon Hee-do, head of the Korea Investment & Securities Research Center, said, "Corporate profits in the first half of this year are inevitably expected to decline sharply due to COVID-19, but from the second half, corporate profits will begin to increase again due to the government's liquidity supply effects, and accordingly, the stock market will also show a gradual upward trend."

Lee Chang-mok, head of NH Investment & Securities Center, forecasted, "Volatility is expected to continue for the time being due to deteriorating corporate earnings caused by the COVID-19 impact, but in the recovery phase after COVID-19, an increase driven by liquidity supply is anticipated."

Oh Hyun-seok, head of Samsung Securities Center, projected the KOSPI index band for the next year to be between 1400 and 2000 points. He added that the 1400 level reflects a low point considering earnings decline, and the 2000 level is the support line before the sharp drop. Oh said, "In the first half, volatility is expected to extend as the fundamental impact of COVID-19 is confirmed," and "In the second half, accumulated policy effects and deferred consumption will appear, leading to a resumption of the upward trend."

KB Securities expects an attempt to return to previous highs within the next year. Shin Dong-jun and Yoo Seung-chang, heads of KB Securities Center, stated, "As summer approaches, the slowdown in COVID-19 spread, partial recovery in consumption, and the resumption of the investment cycle centered on 5G are expected," but emphasized, "However, downward revisions of corporate profits and the possibility of a resurgence this winter remain risk factors."

However, there is also analysis that whether COVID-19 is contained in advanced countries such as the U.S. and Europe will be a key variable for the stock market going forward.

Yoon Chang-yong, head of Shinhan Financial Investment Center, said, "Concerns about financial system collapse have been considerably alleviated due to global monetary policy coordination, and the stock market has rebounded more than 20% from its low," adding, "Future key variables will depend on whether the number of COVID-19 cases in advanced countries slows down or transmission is blocked through vaccine development, and the speed of economic activity normalization through fiscal stimulus measures." He assessed that if these factors become prominent within the second quarter, a favorable stock market environment is likely to continue.

Jo Yong-jun, head of Hana Financial Investment Center, diagnosed, "In the second quarter, the KOSPI is expected to show a W-shaped sideways phase due to worsening real economy indicators and corporate profits, then enter a liquidity-driven phase based on base effects and policy effects from the second half, leading to a full recovery phase."

The possibility of a long-term stock market slump is considered low.

Lee Kyung-soo, head of Meritz Securities Center, said, "Although the global economy has entered a recession phase, it is likely to be the shortest and sharpest recession in history," adding, "Once the real economy normalizes, the recovery speed is expected to be fast, and the possibility of a prolonged recession is low."

Seo Cheol-soo, head of Mirae Asset Daewoo Center, stated, "From a long-term perspective, the stock market will go through a process of recovering from the current economic shock, and the direction of the stock market will vary depending on the strength of the recovery."

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