[Weekly Market Outlook] Economic Normalization Optimism VS US-China Confrontation... COVID-19 Resurgence Also a Variable

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[Asia Economy Reporter Park Jihwan] This week (May 11th to May 15th), the domestic stock market is expected to be significantly influenced by whether major countries such as the United States and Europe, which have moved past the spread of the novel coronavirus infection (COVID-19), normalize their economies. Additionally, volatility is expected to be high depending on the development of the trade conflict between the US and China and the recent increase in COVID-19 confirmed cases. Securities firms forecast that the expected KOSPI band will form within the range of 1860 to 1970 points.

According to the Korea Exchange on the 10th, last week the KOSPI closed at 1945.82, down 0.09% from the previous week. In contrast, the KOSDAQ showed relative strength, closing at 682.30, up 5.75%.

Among the 50 states in the US, 43 will begin economic normalization this week. Most stores such as restaurants, flower shops, and bookstores are scheduled to open in states including California, which was the first to issue a stay-at-home order, as well as Mississippi and Texas.

In Europe, the German government has allowed general stores to reopen regardless of store size. In the UK, lockdown measures will be gradually eased starting today.

However, there are considerable concerns that the somewhat rapid resumption of economic activities could lead to a resurgence of COVID-19. In fact, domestically, just three days after transitioning from 'high-intensity social distancing' to 'everyday quarantine,' a large number of new confirmed cases occurred at clubs in Itaewon, Seoul.

Furthermore, the US raising the 'China responsibility theory' regarding the COVID-19 situation and stating it will review China's compliance with the Phase 1 US-China trade agreement is a significant burden on this week's stock market. There are concerns that the trade conflict, which was a major cause of last year's global economic downturn, might reignite. If US-China tensions escalate again, the possibility of canceling the Phase 1 trade agreement is even being discussed.

Securities firms expect the KOSPI to move between 1860 and 1970 points this week. While economic activities in advanced countries such as the US are expected to resume gradually, which could lead to gains, the possibility of a COVID-19 resurgence is seen as a risk factor.

According to NH Investment & Securities, factors such as the resumption of economic activities in advanced countries, discussions on additional US fiscal policies, and a rebound in China's real economy indicators are positive factors, whereas worsening US real economy indicators, the possibility of COVID-19 resurgence in the US and Europe, and falling oil prices are negative factors.

Researcher Kim Byung-yeon of NH Investment & Securities analyzed, "If the resumption of economic activities in the US and Europe proceeds smoothly, the liquidity effect, confidence in economic recovery, and corporate earnings turnaround will combine to expand upward momentum."

Researcher Kim Yong-gu of Hana Financial Investment diagnosed, "Concerns about the reignition of US-China trade friction risks stemming from the COVID-19 responsibility dispute are emerging in the market at the end of April and early May."

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