[Good Morning Stock Market] COVID-19 Resurgence... Impact on Domestic Stock Market?

On the 17th, as COVID-19 spreads in the Seoul metropolitan area including a confirmed case at Dongdaemun Fashion Town's 'Tongil Sangga,' disinfection workers from a sanitation company are conducting disinfection work at Tongil Sangga in Dongdaemun, Seoul. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Ji-hwan Park] The resurgence of COVID-19, one of the biggest risk factors for the domestic stock market this year, is becoming a reality. If COVID-19 spreads to the level of a major outbreak as it did last March, it is highly likely to negatively impact companies' second-half earnings due to workplace closures and other factors. Experts are saying that not only COVID-19 but also the recent short-term overheating in the stock market increases the possibility of a short-term correction, so investments should be made with this in mind.

◆ Jaeseon Lee, Researcher at Hana Financial Investment = The stock market has encountered an unexpected variable. The number of confirmed COVID-19 cases in Korea has surged since last week. As of the 16th, the daily confirmed cases reached 279, the highest level since early March. The government raised social distancing to level 2 over the weekend, and some are even suggesting the possibility of raising it to level 3. Currently, Korea's situation is similar to that of neighboring Vietnam. Vietnam, once considered a model country for COVID-19 control along with Korea, saw a sharp increase in daily confirmed cases starting the second week of July, effectively entering a second wave of COVID-19 spread. The stock market experienced a short-term correction. The VN Index fell by 4.5% during the week when the second wave began. Of course, it is difficult to simply apply Vietnam's case to the domestic stock market. Unlike Vietnam, the domestic market has seen upward revisions in corporate earnings compared to March, and individual investors' purchasing power has expanded. However, considering the fatigue from the recent rally in the domestic market, this factor could serve as a trigger for a short-term correction. Reviewing the first half of the year, the KOSPI's correction range did not expand proportionally with the increase in daily confirmed cases. When the weekly total of new COVID-19 cases approached around 700, the average weekly return was -6.7%, marking the largest short-term correction in the KOSPI. It is necessary to pay attention to sectors that can show quick recovery after a short-term correction. Sectors with increasing market capitalization weight and positive earnings improvement expectations in the KOSPI can be summarized as healthcare, chemicals, software, and IT (hardware/home appliances) in that order.

◆ Jung-hoon Seo, Researcher at Samsung Securities = There are clear signs of short-term overheating. Since the first trading day of August until the 13th, the KOSPI has risen every single day without a break. Corporate earnings exceeding market expectations and capital inflows mainly from individual investors can sufficiently justify the rise, but the fatigue from continuous gains is likely to be relieved. The current correction should be understood as technical in nature. Although the higher valuation level can be a concern, the clearer signs of economic recovery and still accommodative liquidity are judged to sufficiently compensate for this.

◆ Kyung-min Lee, Researcher at Daishin Securities = It is advisable to refrain from chasing purchases above the 2400 level on the KOSPI, and for short-term investors, a strategy to secure some profits is effective. For buying during corrections, it is also recommended to delay the timing of purchases and allow for a more flexible price range. At this point, it is not too late to identify and respond to variables that could trigger short-term anxiety or profit-taking sentiment. Now is the time to wait, not to follow.

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