[Good Morning Stock Market] KOSPI Breaks 2000 Amid US-China Tensions... "Growing Expectations for Economic Policies"

The KOSPI Surpassed 2000 Intraday for the First Time in Two and a Half Months
Preemptive Reflection of COVID-19 Concerns... "Index Expected to Rise Until Summer"

[Asia Economy Reporter Minji Lee] Foreign investors have continued their buying spree in the domestic stock market for three consecutive trading days, and the KOSPI surpassed the 2000 mark intraday for the first time in two and a half months. Despite weakening key economic indicators and corporate fundamentals, the index continues its upward rally, largely driven by policy expectations.

On the other hand, on the 21st (local time), the New York Stock Exchange showed a contrasting trend compared to the previous day’s sharp rise fueled by vaccine optimism. As news emerged that China is pushing for the enactment of the ‘Hong Kong National Security Law,’ President Donald Trump warned of a strong response, escalating tensions between the U.S. and China, leading the three major New York indices to close lower.

[Image source=Yonhap News]

◆ Jaeyoon Lee, Researcher at SK Securities = With the KOSPI approaching the 2000 level, I believe that the weak economic indicators and corporate earnings have already been priced into the index. Policy support such as liquidity supply and expectations for rapid earnings improvement after economic activities are driving the index.

The estimated net income for KOSPI companies next year is currently around 133 trillion won. Considering that net income estimates are typically revised downward by about 20%, it is judged that earnings improvement of more than 20% compared to this year (10 trillion won) is possible.

COVID-19 is strengthening the market dominance of tech and platform companies. Expectations for new infrastructure investments such as China’s Two Sessions and Korea’s New Deal are also high, creating strong short-term momentum. Among stocks, there is expected to be a concentration on companies with high growth potential and significant intangible assets.

Although volatility will continue due to concerns over COVID-19 and the resumption of the U.S.-China trade dispute, the upward trend is expected to continue until this summer. However, there are many events that could attract market attention in August and September. The end of the Federal Reserve’s emergency lending program, the expiration of the temporary tariff exemption on Chinese products in the U.S., and the U.S. presidential election TV debates are all expected to heighten market caution.

◆ Kyungnae Bang, Researcher at Korea Investment & Securities = The sharp fluctuations in the stock market following the announcement of Moderna’s Phase 1 vaccine trial results show how important the end of COVID-19 is for setting future market direction.

Considering the progress in vaccine development following treatments and the economic normalization efforts in New York, which was the hardest hit by COVID-19 in the U.S., positive investment sentiment is expected to continue. Sectors expected to benefit include IT and communication services.

European stock markets are expected to show significant differences in trends between countries. Germany, which has already begun economic normalization, and the UK, which is implementing additional fiscal and monetary policies, are preferred countries. Italy and France have also started economic normalization but still face restrictions in key service sectors such as tourism.

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