[Weekly Market Outlook] Fluctuations Amid Concerns of COVID Resurgence... September 'Short-Term Adjustment'

Low Possibility of Major Adjustments Despite Uncertainty Factors

[Asia Economy Reporter Oh Ju-yeon] The September stock market is expected to undergo short-term corrections due to the resurgence of COVID-19, uncertainties surrounding the U.S. presidential election, and inflation concerns. However, these corrections are seen as buying opportunities, with attention likely to focus on existing leading stocks and sectors turning profitable.

On the 30th, NH Investment & Securities projected the KOSPI range for the first week of September to be between 2300 and 2430. Factors such as the extension of the short-selling ban, expectations for additional U.S. economic stimulus, and hopes for COVID-19 vaccine development are seen as upward drivers, while the increase in new COVID-19 cases and valuation pressures on growth stocks are considered downward factors.

Kim Young-hwan, a researcher at NH Investment & Securities, stated, "On the 27th, the Financial Services Commission decided to extend the short-selling ban for six months." He explained, "This extension could temporarily prolong the market's focus on growth stocks." However, the rising number of COVID-19 cases remains a concern. Kim added, "It is necessary to select promising sectors by considering the valuation burden on existing leading growth stocks and the strengthening of the untact (contactless) environment. We view semiconductor and automobile stocks, which are related to U.S. exports, as well as telecommunications and gaming stocks, which may benefit from the untact environment, positively."

Hana Financial Investment forecasted that the KOSPI in the first week of September would move within the 2300 to 2410 range, continuing a limited upward trend. This is attributed to the dovish stance of U.S. Federal Reserve (Fed) officials, which is expected to sustain liquidity-driven markets. However, caution regarding the domestic spread of COVID-19 is expected to limit the upward momentum.

Lee Jae-sun, a researcher at Hana Financial Investment, analyzed, "Last week saw a rare consecutive buying spree by foreign investors since the end of July." He noted, "Notably, the stocks jointly purchased by foreigners and institutions were concentrated in existing growth leaders such as NAVER, Kakao, LG Chem, Seegene, and NCSoft." Lee added, "Previously, the buying momentum was driven by individual investors, so the observed joint net buying by foreigners and institutions suggests these players recognize structural changes in the domestic market and have additional buying capacity."

Looking at the market outlook for the entire month of September, the emphasis is on a 'short-term correction.'

KB Securities set the expected KOSPI range for September at 2190 to 2500. Risk factors include uncertainties ahead of the U.S. presidential election, escalating U.S.-China tensions, concerns over a second COVID-19 pandemic, and high valuation pressures.

Lee Eun-taek, a researcher at KB Securities, said, "It is difficult to predict how long the COVID-19 resurgence will last, but there is a possibility of reaching a peak around late August to early September sooner than expected." He added, "In this case, the domestic stock market may show relative weakness until early September, followed by normalization."

However, he expects the decline to differ from the drop seen in March. Lee explained, "Looking at North America and Europe, the second pandemic can be considered to have already occurred." He assessed, "So far, the price correction during the resurgence has been around -7% to -8%."

He continued, "Despite the recent COVID-19 resurgence, the intensity of 'social distancing' shown in Google Mobility data has not rebounded significantly." He interpreted this as meaning that while the psychological impact of the second pandemic may cause stock prices to fall, the shock to corporate earnings and the economy's fundamentals will be minimal. In conclusion, he stated that the current level of spread is unlikely to cause major shocks to the economy or stock market and recommended, "During corrections, maintain the KOSPI floor at 2100 and adopt a staggered buying strategy around the 2200 level."

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