Capital Market Research Institute, "KOSPI to Reach Up to 2350 This Year"

[Asia Economy Reporter Oh Ju-yeon] There is a forecast that the domestic stock market could surpass the 2300 mark in the second half of this year.

On the 11th, the Korea Capital Market Institute presented in its '2020 Second Half Economic and Capital Market Outlook Report' that the domestic stock market is expected to maintain an upward trend in the second half, suggesting a forecast band of 2050 to 2350.

The institute stated, "The economic normalization expected in the second half due to the resumption of domestic and international economic activities is presumed to have been largely reflected in stock prices in advance, so further index gains are expected to be limited," but added, "Abundant global liquidity and the effects of monetary and fiscal policies of major countries will help further index increases." It also evaluated that the relatively good quarantine performance compared to major countries, resulting in less damage to the real economy, is positive for future economic and stock price recovery.

This year’s domestic gross domestic product (GDP) growth rate forecast was presented at -0.8%, assuming a scenario where the pandemic enters a mild lull without a large-scale second wave. However, if there is a significant increase in new confirmed cases in the fourth quarter due to a second wave of infections after September, the growth rate is expected to fall to -1.9% this year. The institute forecasted next year’s growth rate at 3.4%, but still below the potential growth rate.

The base interest rate is expected to be cut once more during the second half of this year. Considering the domestic growth trajectory and inflation forecast, the appropriate base interest rate is estimated to be around 0%. It added, "In the event of a second wave of infections, it is necessary to introduce quantitative easing to stabilize government bond yields in response to concerns over household and corporate debt instability."

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