[Good Morning Stock Market] Mixed Positive and Negative Factors in the Market... Emphasis on 'Positive Signals'

[Asia Economy Reporter Oh Ju-yeon] The US stock market's rebound yesterday is expected to have a positive impact on the domestic market. On the 14th (local time), the Dow Jones Industrial Average closed at 23,625.34, up 1.62% from the previous day; the S&P 500 rose 1.15% to 2,852.50; and the Nasdaq increased 0.91% to 8,943.72. The market showed mixed reactions amid expectations for economic activity resumption and concerns over the resurgence of COVID-19. This sentiment is anticipated to be reflected in the domestic stock market on the 15th.

◆ Sangyoung Seo, Kiwoom Securities Researcher = The Korean stock market fell the previous day due to the delayed US economic recovery and US-China trade tensions. In particular, continuous selling by foreign investors added to supply-demand pressures. Amid this, the rebound of financial stocks, which had experienced significant declines, in the US market on the 14th was positive, as it reversed early losses and led to a recovery. However, concerns over delayed economic recovery due to US employment instability and the expansion of US-China trade frictions are still expected to weigh on the market.

Of course, the announcement by the New York State Governor to expand phased economic reopening, which led to a late-session rebound, and the sharp rise in international oil prices have contributed to a favorable investment sentiment.

Additionally, news of Apple acquiring a virtual reality (VR) company boosted related stocks as well as the semiconductor sector (Philadelphia Semiconductor Index up 2.81%), which is a positive sign. Considering this, although the Korean stock market faces mixed positive and negative factors, it is expected to focus more on the positive aspects.

◆ Yonggu Kim, Hana Financial Investment Researcher = Next week, the domestic stock market is expected to show a neutral price trend as it seeks to stabilize around the 1,900-point level on the KOSPI index. The market’s focus next week will likely be on Chinese policy variables surrounding the Two Sessions (the Chinese People's Political Consultative Conference on the 21st and the National People's Congress on the 22nd). China, facing dual macroeconomic challenges both domestically and internationally, is expected to concretize its approach with strong domestic demand stimulus internally and implementation of the US trade agreement externally.

The key question is the portfolio response strategy for the second half of the year. Unless COVID-19 is overcome early and a V-shaped immediate global economic recovery occurs, the potential for further expansion in domestic market earnings, valuation, and index is likely limited.

This is why the focus of the second-half market strategy should be on alpha plays based on sector and stock selection rather than index beta plays. The portfolio strategy will emphasize domestic consumer goods (communication, bio, Chinese consumer goods) as the foundation of alpha, followed by guarding the gateway for export capital goods sensitive to emerging market policies aimed at economic recovery (materials, industrial cyclical sectors).

The triple benefits of global untact business growth, Chinese consumption stimulus, and the Korean New Deal economic response are expected to justify premium valuations for domestic consumer goods led by communication (software, telecommunications, media), large bio stocks, and food and beverage sectors.

Furthermore, the need for cyclical bottom-fishing is underscored by the COVID-19 safe zones, lack of momentum in export consumer goods (IT, automobiles), and the potential for expanded fiscal investment in global infrastructure led by the G2 countries. Additionally, the seasonal revival of foreign investors’ love calls for KOSPI 200 index futures in the second half is expected to support large-cap high-dividend stocks and preferred shares as safe havens in the market.

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