[Good Morning Stock Market] "Liquidity Flowing to Asia... Strong Value Stock Rebound Expected"

[Asia Economy Reporter Eunmo Koo] As the novel coronavirus disease (COVID-19) resurges in the United States and Europe, advanced countries' currencies are weakening, creating opportunities for emerging markets. Although index adjustments are expected to continue for the time being, a strong mid- to long-term rebound in value stocks is anticipated starting next year.

◆Soyeon Park, Researcher at Korea Investment & Securities=The resurgence of COVID-19 in the US and Europe is severe. The KOSPI has also reversed to a weak trend. However, an interesting aspect is the strengthening of the Korean won. Generally, when external variables worsen to the current level, foreign investors withdraw, and the won weakens. But this time, the more the adjustment deepens, the stronger the won becomes. This suggests that as the second wave of COVID-19 grows, the hegemony of Asian manufacturing, which is effectively controlling COVID-19, is becoming more solid, and the weakness of advanced countries' currencies is creating new opportunities for emerging markets. Although index adjustments will continue a bit longer, a strong mid- to long-term turnaround in value stocks is expected from next year. The expected KOSPI range for November is 2200 to 2380 points.

Domestic consumer sentiment index for October rose significantly compared to the previous month. This was largely due to the social distancing level being lowered to Level 1. Although caution regarding COVID-19 remains, domestic consumption is gradually recovering. The recovery of consumer sentiment ultimately stimulates demand, leading to increased sales in related industries. From this perspective, stocks were selected this month considering improved consumption momentum. Priority is given to IT and consumer discretionary sectors, and an increase in the weighting of economically sensitive material sectors such as chemicals and steel is also recommended.

◆Seungjin Shin, Researcher at Samsung Securities=The biggest negative factor in the stock market is uncertainty. October was a month when uncertainties that investors dislike most?global COVID-19 resurgence, the imminent US presidential election, and the lowering of major shareholder requirements for domestic stock capital gains tax?suppressed the stock market.

It has been a repeated fact that market volatility increases ahead of the US presidential election. What is different now is that the COVID-19 variable still exists. However, considering that since last March global governments have been actively responding with policies and that the development of COVID-19 vaccines and treatments is imminent, the impact of COVID-19 on the stock market is expected to be limited.

If the macro environment in October was dominated by uncertainty, November is expected to see these uncertainties gradually dissipate. First, the US presidential and congressional elections will be held this week. Once the next president and Congress are finalized, the pace of additional stimulus measures is likely to accelerate. Further fiscal and monetary policy momentum can also be expected from the upcoming Federal Open Market Committee and Bank of England monetary policy meetings.

Concerns over the lowering of major shareholder requirements for domestic stock capital gains tax, which has been a continuing issue domestically, are also expected to be resolved in November. The portfolio of promising stocks for November includes internet and biotech sectors, which had been pre-adjusted due to supply-demand issues unrelated to fundamentals; IT, automotive, and chemical sectors supported by global stimulus and earnings momentum; and eco-friendly vehicles and green energy (solar power and hydrogen) value chains expected to benefit from global environmental policies.

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