[Good Morning Stock Market] "Even if Social Distancing is Raised to Level 3, There Will Be No Shock Like in March"

"Major Countries' Economic Fundamentals Continue to Recover Despite COVID-19
Additional Policy Capacity Remains, Domestic Economic Recovery Will Not Falter"

[Asia Economy Reporter Minji Lee] If social distancing level 3 is implemented due to the resurgence of the novel coronavirus infection (COVID-19), the pace of economic recovery in the second half of the year is expected to slow down further. This is because the prolonged COVID-19 situation is limiting the recovery of private consumption. However, since economic activities in major countries are continuing and additional government policy support such as the 4th supplementary budget may be introduced, the likelihood of a situation similar to March reoccurring is low.

◆ Kyuyoun Jeon, Researcher at Hana Financial Investment = The direction of the domestic economy is expected to vary depending on whether the social distancing level is raised to level 3. If social distancing level 3 is realized, a growth rate decline of more than -2% is anticipated. Since March, the number of new domestic employees has decreased for five consecutive months, and employment recovery is expected to be difficult, especially in high-contact sectors such as the service industry and vulnerable groups. The domestic wage growth rate has also turned downward, so the situation where employment and income decreases suppress consumption is expected to continue.

However, it is unlikely that a shock similar to COVID-19 will occur again. The prolonged situation has allowed more time to prepare alternatives. Additionally, the United States and European countries have expressed negative opinions on lockdown measures, considering that shutdowns cause excessive costs despite the resurgence of COVID-19.

Korea's external sector is also expected to follow the global economy's Nike-shaped recovery trend. However, the pace of export recovery is expected to be somewhat moderate compared to previous forecasts due to delays in semiconductor market recovery in the second half of the year. With limited monetary policy capacity remaining, it will be necessary to mitigate the domestic demand slowdown through rapid execution of the existing supplementary budget and preparation of the 4th supplementary budget.

◆ Kyungmin Lee, Researcher at Daishin Securities = The KOSPI correction phase should be considered until COVID-19 enters a stabilization phase. However, considering the situation at the end of March, the spread of COVID-19 is likely to enter a stabilization phase by September.

The possibility of a panic market similar to March due to this COVID-19 resurgence is low. This is because sufficient policy momentum has been injected and additional fiscal policies remain. The government is currently discussing additional fiscal policies such as the second disaster relief fund payment and the 4th supplementary budget.

It is also necessary to consider that the recovery of global fundamentals, which determine the trend of global financial markets, is continuing. In early March, major countries chose economic shutdowns due to the spread of COVID-19, but since economic activities resumed in April, the economic recovery trend has become clear. Credit spreads continue to stabilize downward, and the dollar is under weak pressure.

The current resurgence may stimulate domestic economic contraction and slow the pace of fundamental recovery in the Korean market. However, it is judged that the possibility of Korea's recovery trend, which is highly dependent on external factors, breaking down is low. When COVID-19 enters a stabilization phase, Korean fundamentals and financial markets are expected to show rapid resilience and resume an upward trend. It is advisable to use the short-term correction expected in September due to COVID-19 as an opportunity to increase core holdings.

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