[Weekly Market Review] COVID-19 Eases, General Election Concludes... Uncertainty Decreases, 1900 Level Recovers

Recovery to 1900 Level in One Month
Significant Decrease in New COVID-19 Cases
Political Uncertainty Removed with General Election Conclusion

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] In the third week of April, the KOSPI index surpassed the 1900 mark for the first time in a month. This is attributed to the slowdown in the spread of the novel coronavirus infection (COVID-19) and the conclusion of the 21st National Assembly elections, which eased various uncertainties.

According to the Korea Exchange on the 18th, the KOSPI closed at 1914.53 the previous day. It rose 3.09% compared to the previous session, reaching the 1900 level for the first time since April 11. Compared to the lowest point of 1439.43 recorded on March 19, the lowest since July 2009, it represents a 33% increase.

On the first trading day of the week, April 13, the KOSPI closed at 1825.76, down 1.88% from the previous week. This reflected concerns over the smaller-than-expected production cuts by oil-producing countries and unease during the first-quarter earnings season. On April 12 (local time), the Organization of the Petroleum Exporting Countries (OPEC) and 10 oil-producing countries participating in OPEC+ held an emergency video conference and agreed to cut daily crude oil production (excluding gas condensate) by 9.7 million barrels from May 1 to the end of June. However, due to the unprecedented drop in oil demand caused by COVID-19, this was seen as insufficient to rebound oil prices.

On April 14, the domestic stock market rose again, closing at 1857.08, up 1.72% from the previous session. This was attributed to expectations of COVID-19 containment in the U.S., favorable March export-import data from China, and large-scale net buying by institutional investors. On that day, institutional investors purchased stocks worth 426.9 billion KRW, with pension funds net buying 241.6 billion KRW in particular.

The market was closed on April 15 due to the general election. On April 16, despite a correction in the U.S. stock market caused by shocks to major U.S. economic indicators, the market remained flat due to additional liquidity supply by the People's Bank of China and expectations of U.S. President Donald Trump's announcement on the resumption of economic activities. It closed at 1857.07, down 0.01 points (0.00%) from the previous trading day. This was considered a relatively strong performance compared to the 1-2% drop in major U.S. indices the day before.

On the last trading day of the week, April 17, the index rose more than 3%, breaking through the 1900 level for the first time in a month since April 11. This was interpreted as growing expectations for the removal of various uncertainties as the general election concluded and the increase in COVID-19 confirmed cases significantly slowed. According to the Central Disease Control Headquarters on April 17, the daily new confirmed cases, which were around 100 at the end of last month, dropped sharply to the 20s from April 13. On April 18, the number fell to the teens for the first time since February 20.

Seonghoon Seo, a researcher at Samsung Securities, explained, "The domestic stock market's top-tier returns globally since the bottom reflect expectations that Korea is effectively managing COVID-19, resulting in less economic shock compared to other countries. The high fiscal soundness provides room for future policy responses, and the conclusion of the election reducing political uncertainty is also a positive factor."

The International Monetary Fund (IMF) also forecasted that Korea would rank among the top in economic growth rates among the Group of Twenty (G20) countries based on these factors. According to the 'G20 Outlook Report' released by the IMF on April 16 (local time), Korea's GDP growth forecast for this year is minus (-) 1.2%. It ranked fourth after China (1.2%), India (1.9%), and Indonesia (0.5%). The advanced economies group, including Korea, the U.S., Canada, Japan, Australia, Germany, the U.K., France, and Italy, is projected to have a growth rate of -6.0%, down 7.6 percentage points from the January forecast.

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