[Weekly Market Outlook] "Both Upper and Lower Limits to Persist in the Market"

Market Focus Concentrates on China's Lianghui

In front of the Great Hall of the People in Beijing ahead of last year's Two Sessions opening (Photo by EPA Yonhap News)

[Asia Economy Reporter Geum Bo-ryeong] The domestic stock market is expected to continue a range-bound trend with both upper and lower limits from the 18th to the 22nd. Market focus is likely to concentrate on Chinese policy variables around the China Two Sessions starting on the 21st.

According to Cape Investment & Securities on the 17th, the weekly forecast for the KOSPI index from the 18th to the 22nd is 1890 to 2000. Hana Financial Investment also projected a range of 1900 to 1950.

First, the upside potential is predicted to be somewhat limited. Various real economy indicators reflect the possibility of an economic recession due to COVID-19, such as the U.S. unemployment rate approaching 15% in April and a sharp decline in South Korea's export growth rate for May (as of the 10th). Additionally, the escalating conflict between the U.S. and China is increasing uncertainty. Yoon Young-gyo, a researcher at Cape Investment & Securities, explained, "Negative factors are overwhelming positive factors, which will limit the upside potential of domestic and international stock indices."

The possibility of a resurgence of COVID-19 in South Korea is also emerging. U.S. health authorities have expressed concerns about a COVID-19 resurgence. Researcher Yoon emphasized, "Given that the reopening of economic activities in major countries such as the U.S. and South Korea was initially taken for granted, the impact of the emerging resurgence risk may increase the burden of delayed economic recovery. The increase in confirmed cases in South Korea during the latter half of this month will be an important variable."

At the same time, the securities industry views that downside support has also been demonstrated. Kim Yong-gu, a researcher at Hana Financial Investment, said, "Despite concerns over a prolonged U.S. recession and a supply-demand environment dominated by selling during the May expiration week, solid downside support was confirmed, dispelling the 'Sell in May' pessimism. This was due to the unstoppable momentum of individual investors joining the Buy Korea trend (weekly net purchase of 2.1 trillion KRW in KOSPI), the rush of beneficiaries from the Korean New Deal policy, and expectations for Chinese policy stimulus around the Two Sessions, which functioned as a buffer against latent market uncertainties."

China will start the Two Sessions on the 21st. The focus of this session is how the Chinese government will respond to U.S. aggression. The U.S. is applying comprehensive pressure on China regarding COVID-19 responsibility, industry, finance, and diplomacy, so China is likely to take a tough stance, including retaliatory measures.

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