[Weekly Market Outlook] Concerns Over COVID Re-Yohaeng... "Increased Likelihood of Sell-Offs Until Positive News Emerges"

[Asia Economy Reporter Oh Ju-yeon] In the fourth week of June (22-26), the domestic stock market is expected to see limited index gains due to concerns over a second wave of COVID-19 and North Korean risks. However, additional stimulus measures such as the U.S. Federal Reserve's (Fed) accommodative monetary policy could have a positive effect. Securities firms generally agree that a strategy focusing on individual stocks rather than the overall index may be more advantageous.

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On the 21st, NH Investment & Securities projected the KOSPI range for the following week to be between 2070 and 2150. This is because concerns about a resurgence of COVID-19 in the U.S. and China could weigh on index gains. Recently, daily new COVID-19 cases in nine U.S. states have hit record highs, and cluster infections are spreading in Beijing, China, increasing fears of a second wave. This atmosphere lowers expectations for economic recovery and dampens risk asset appetite in the stock market. The release of sell orders during the week is expected to limit market gains.

Additionally, the domestic stock market needs to closely monitor North Korea’s missile provocations as a risk factor. While previous North Korean risks were mostly one-off issues, there are concerns this time that the situation could become more prolonged.

Moon Nam-jung, a researcher at Daishin Securities, stated, "Since the March low, the global stock markets have been intensely active for about three months, leading to increased fatigue." He added, "This is evident in the recent week’s market where neither positive nor negative factors dominate, resulting in large daily fluctuations."

Moon predicted, "Concerns over a resurgence of COVID-19 in the U.S. and China next week, along with President Trump's signing of the Uyghur Human Rights Policy Act, which could escalate conflicts with China, are likely to lead to price adjustments in the stock market."

However, based on past crisis experiences where reliance on government monetary and fiscal policies increased, there is an analysis that the Trump administration could use the June price adjustment as an opportunity to intensify the scale and speed of additional stimulus measures. In this context, the adjustment range is likely to be limited by market liquidity, and the upward trend is expected to continue based on expectations for further policies.

Lee Kyung-min, a researcher at Daishin Securities, evaluated, "The recent fluctuations in the KOSPI are a step back to move two steps forward," describing it as "a phase of pausing and contracting to go further." He added, "While short-term volatility should be approached cautiously, from a mid- to long-term investment strategy perspective, more active responses rather than avoidance are necessary," and emphasized, "It is still too early to be complacent, but the market should be viewed from a buying perspective."

Investment strategies are expected to be more advantageous when approached on a stock-by-stock basis rather than focusing on the index.

Researcher Noh Dong-gil of NH Investment & Securities said, "In a period of slowing KOSPI gains, a strategy focusing on changes in sectoral returns rather than betting on the index itself is effective." Noh diagnosed, "In the first half of the year, sector returns in the KOSPI outperformed benchmarks in the order of healthcare, software, IT home appliances, and chemicals, which resulted from active rebalancing toward future growth stocks during the first half’s adjustment phase."

He emphasized, "The promising industries anticipated by the stock market share commonalities such as bio-healthcare, internet platforms, secondary batteries, and growth stocks," adding, "The concentration on growth stocks, which have shown favorable returns compared to the beginning of the year, may continue until there is confidence in economic improvement, making a growth stock-focused response strategy effective."

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