[High Kick Han Stock Market] Rapid Rebound Despite Corona, Will It Break Out of the Box Range?

Recovery from 1400 to 2200 in Two Months
Major Risks Remain Including Second Wave and Trade War
Top End of KOSPI Forecast Bands by 13 Securities Firms is 2350

[Asia Economy Reporter Kum Boryeong] The KOSPI, which had fallen to the 1400 level due to the impact of the novel coronavirus infection (COVID-19), soared to the 2200 level in just two and a half months, reflecting expectations for economic recovery in advance. However, concerns over the resurgence of COVID-19 and the intensification of the US-China trade war remain significant risks in the second half of the year, which are expected to pose considerable burdens on the future stock market recovery. Nevertheless, experts unanimously emphasized the need to focus on growth potential in sectors such as non-face-to-face (untact), software, pharmaceuticals and medical, and healthcare.

According to a survey conducted on the 19th targeting 13 domestic securities firms, the expected KOSPI band for the second half of the year ranged from a minimum of 1700 to a maximum of 2350.

The outlook for the stock market in the second half is not very bright. Park Hee-chan, head of the Global Asset Allocation Team at Mirae Asset Daewoo, analyzed, "Until a COVID-19 vaccine is developed, we cannot expect the economy to quickly return to normal levels," adding, "As job recovery proceeds very slowly, consumption recovery in advanced countries with a large service sector is slow, which will have a negative chain effect on export manufacturing countries."

The biggest negative factor cited was the second pandemic (global outbreak) of COVID-19. This is because, with no vaccine or treatment yet available, signs of a second wave are appearing worldwide. The somewhat fortunate point is that even if a second pandemic occurs, countries’ response systems have been established, so the impact will not be as severe as the first wave. When the World Health Organization (WHO) declared the COVID-19 pandemic in March, the KOSPI dropped 34.05% in one month, from 2210.34 on February 19 to 1457.64 on March 19, based on closing prices. Lee Eun-taek, head of the Stock Strategy Team at KB Securities, explained, "Although the possibility of COVID-19 resurgence is high, enhanced response capabilities will reduce the economic shock compared to the first wave."

The rekindling of the US-China trade war also remains a negative factor. The US is confronting China not only over trade conflicts but also over COVID-19 responsibility, the South China Sea, Hong Kong issues, and various economic, military, and diplomatic fields. Kim Ji-san, head of the Kiwoom Securities Research Center, said, "The US-China conflict is expected to intensify further because it is part of President Donald Trump’s election strategy," adding, "Whenever President Trump mentions a tough stance on China, his approval ratings tend to rise."

During the COVID-19 volatile market, a significant amount of funds moved into the stock market, and the securities industry commonly analyzes that this trend will continue in the second half. According to the Korea Financial Investment Association, as of the 16th, investor deposits amounted to 48.0073 trillion won. Considering that it was 27.571 trillion won on January 16 before the COVID-19 spread, more than 20 trillion won entered the stock market as standby funds within five months. As borrowing to invest increased, the balance of margin loans was recorded at 12.0263 trillion won as of the 16th of this month. This also increased by more than 2.3 trillion won compared to 9.6955 trillion won on January 16.

Lee Kyung-soo, head of the Meritz Securities Research Center, emphasized, "Capital inflow into the stock market is expected to continue," adding, "The KOSPI dividend yield remains in the 2% range, which is an attractive level in the current interest rate environment." Yoon Chang-yong, head of the Shinhan Financial Investment Research Center, also said, "Individual funds are filling the void left by foreigners, showing the strongest net buying since 1995," and added, "The main driver is the learning effect. Investors, including individuals, know that buying during sharp KOSPI drops caused by domestic and external economic recessions is an efficient response."

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