[Weekly Market Review] Stock Market Swings Between Hot and Cold Amid COVID-19 Resurgence

Eyes on New COVID-19 Case Announcements
Stock Market Fluctuations Around 10 AM
Q3 Earnings Estimates Shift Amid Second Wave Concerns
"However, Ample Liquidity Supports Market Bottom"

[Asia Economy Reporter Oh Ju-yeon] In the last week of August, the domestic stock market showed notable intraday fluctuations due to concerns over the resurgence of COVID-19. In particular, daily trading volume in the KOSPI market significantly decreased from 18.7 trillion KRW as of the 11th to an average of 12.8 trillion KRW in the fourth week of August, amid caution over the possible elevation to social distancing level 3. However, the consensus among securities firms is that abundant liquidity will support the market's downside, preventing a sharp drop like that in March.

According to the Korea Exchange on the 29th, the KOSPI rose 1.03% from 2329.83 on the 24th to 2353.80 on the 28th. Although the weekly increase was slight, intraday volatility was prominent. The index fluctuated between the high 20s and nearly 50 points within a day, repeatedly swinging between negative (-) and positive (+) changes compared to the previous day. The market particularly focused on the number of new COVID-19 cases, showing volatility around the 10 a.m. announcement. This is analyzed as investor anxiety over the rising number of confirmed cases being reflected in investment patterns.

By investor type, individuals net bought 444.2 billion KRW and foreigners net bought 295.3 billion KRW in the KOSPI market, while institutions sold off 882 billion KRW.

The stock most purchased by individuals was Samsung Electronics, with net buying worth 493.3 billion KRW, ranking first in net purchases. This was followed by POSCO, SK Telecom, and Shinhan Financial Group.

Foreigners bought the most Samsung SDI, acquiring 209 billion KRW worth. They also ranked second in net purchases with SK Hynix at 120.4 billion KRW. Other top net purchases included TIGER MSCI Korea TR (114.5 billion KRW), KODEX 200 (90.5 billion KRW), LG Chem (84.6 billion KRW), and Shinpung Pharmaceutical (51.6 billion KRW).

Institutions net bought SK Hynix (107.8 billion KRW), LG Chem (87.5 billion KRW), KODEX KOSDAQ150 Leverage (73 billion KRW), NCSoft (70.8 billion KRW), and Hyundai Motor (61 billion KRW), among others.

Meanwhile, as the number of COVID-19 cases increased, third-quarter earnings estimates showed a slight decline.

According to a recent analysis by financial information provider FnGuide comparing operating profit estimates of domestic listed companies before and after the resurgence of COVID-19 over the past two weeks, the operating profit estimate for 243 companies in the third quarter of this year was 37.0286 trillion KRW, down approximately 0.43% compared to the 9th when new confirmed cases were 30. Although this is a 16.01% increase compared to 31.8967 trillion KRW in the third quarter of last year, it remains uncertain whether existing forecasts can be maintained as the market is still observing the COVID-19 spread trend and recent sentiment has not yet been reflected in the consensus.

Compared to the 9th before the COVID-19 resurgence issue, sectors with notably decreased third-quarter earnings consensus were representative contact industries such as media, textiles and apparel, personal care products, and department stores.

Despite ongoing market burdens due to the COVID-19 resurgence and the possibility of raising social distancing to level 3, the stock market is expected to be supported at the bottom by abundant liquidity.

Han Dae-hoon, a researcher at SK Securities, forecasted, "Customer deposits have increased to 51.7 trillion KRW, and inflows of individual funds are expected to continue." He added, "Moreover, unlike in the past, individual investors are focusing their purchases on 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, and chemicals (batteries), as well as the automobile sector, which showed earnings improvements. Conversely, with lowered expectations for economic activity resumption, selling pressure was dominant in cyclical and domestic consumption sectors." Researcher Han predicted, "Although there may be caution regarding macroeconomic indicators at the end and beginning of the month, as sensitivity to economic indicators has decreased, a liquidity-driven market centered on leading stocks will continue."

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