[Good Morning Stock Market] Stock Market Less Sensitive to Economic Indicators... "Liquidity-Driven Market Continues"

This Year's Economic Growth Forecast Revised from -0.2% to -1.3%
KOSDAQ Trading Volume Increases Despite COVID-19 Resurgence
"Lower Sensitivity to Economic Indicators, Liquidity Market Centered on Growth Stocks to Continue"

[Asia Economy Reporter Minji Lee] This year's economic growth forecast is expected to decline further to -1.3%. If the economic recovery trend worsens due to the resurgence of COVID-19 and exports and private consumption weaken further, the growth rate is expected to fall to the -2% range. Amid this, individual investors appear to be increasing their buying of leading stocks such as semiconductors, healthcare, and batteries. Market experts predict that, as sensitivity to economic indicators has decreased, a liquidity-driven market centered on leading stocks will continue.

◆ Miseon Lee, Hana Financial Investment Researcher = The Bank of Korea lowered this year's growth forecast to -1.3% yesterday. The main cause was a significant downward revision in consumption and exports in the second half of the year. In this revised forecast, private consumption in the second half was sharply lowered from 0.6% year-on-year to -3.4%. The number of employed persons was adjusted from 30,000 to -130,000. Exports are expected to worsen further from -3.7% to -5.6%. With expectations that the negative impact of the COVID-19 spread will be prolonged, next year's growth forecast was also lowered from 3.1% to 2.8%.

To achieve -1.3% growth this year, quarterly growth of 1.5% is required in both the third and fourth quarters. Looking at the recovery path after the 2008 financial crisis, after a sharp GDP decline, the economy slowly recovered forming a U-shaped bottom over two quarters, and only in the third quarter of 2009, about a year later, did it approach the previous growth trajectory.

According to this forecast, the economy must rebound relatively sharply from the third quarter, but considering past recovery patterns, this is not easy. In the Bank of Korea's worst economic outlook scenario, domestic GDP is expected to decline by -2.2%. This assumes that the overseas COVID-19 spread continues until the end of next year, domestic spread lasts through this winter, and overseas economic activities and travel restrictions persist.

Meanwhile, the Monetary Policy Committee unanimously decided to keep the base interest rate at 0.50%. Although there is room for a rate cut, it was judged that caution is necessary considering the expected effects and side effects of lowering an already low base rate further.

◆ Daehun Han, SK Securities Researcher = As fears of COVID-19 resurgence continue, concerns about raising social distancing to level 3 are growing. Accordingly, the daily trading volume of the KOSPI decreased from 18.7 trillion won on the 11th to 12.8 trillion won this week.

On the other hand, KOSDAQ trading volume continues to increase and has surpassed KOSPI's trading volume. Since 2000, out of 5,100 trading days, KOSDAQ trading volume has exceeded KOSPI's only 425 days, of which 46 days have been since March this year. This confirms the abundant liquidity and strength of individual funds.

Customer deposits have increased to 51.7 trillion won. Based on abundant liquidity, inflows of individual funds are expected to continue. Unlike in the past, individual investment funds are leading to purchases of leading stocks. Even in August, when concerns about the second wave of COVID-19 arose, individual funds concentrated on leading sectors such as semiconductors, healthcare, chemicals (batteries), and the automobile sector, which showed performance improvements.

Conversely, as expectations for economic activity resumption declined, selling pressure was dominant in cyclical and domestic sectors. As investors' sensitivity to economic indicators has decreased, it is judged that a liquidity-driven market centered on leading stocks will continue.

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