[Weekly Market Outlook] From 'Untact' to 'Contact'... Will KOSPI Surpass 2500?

[Asia Economy Reporter Oh Ju-yeon] Since the news of the development of a novel coronavirus infection (COVID-19) vaccine, attention has been focused on the industries and stocks that will drive future index gains. While the previous index rise was led by untact (non-face-to-face) related stocks, the expectation of economic normalization following the vaccine development news has caused contact (face-to-face) related stocks, which had not risen until now, to rebound. As these industries alternately rise, the index has reached near the 2500 level. Now, market interest is concentrated on whether the 2500 level will be surpassed.

[Image source=Yonhap News]

On the 15th, NH Investment & Securities projected the KOSPI expected band for the third week of November (16-20) to be between 2400 and 2500. While the economic improvement in emerging countries and the easing of uncertainty over the U.S. presidential election are factors for increase, the re-lockdown measures by U.S. states are considered a downside factor. In Korea, the number of COVID-19 confirmed cases has again exceeded 200, raising concerns about a resurgence of the virus.

Labor Gil, a researcher at NH Investment & Securities, said, "The expectation of COVID-19 vaccine development is a variable that will continue to improve risk asset investment sentiment," but added, "The re-lockdown measures by U.S. states may offset some of the optimism."

Researcher Roh diagnosed, "The inflow of foreign investor funds due to relief from the election results has driven the rise in the domestic stock market," and "Since November, foreign funds have concentrated on IT stocks such as Samsung Electronics and SK Hynix, as well as secondary battery stocks like LG Chem and Samsung SDI, and net purchases of financial investment spot stocks have also contributed to the domestic market's upward trend." He added, "Despite concerns about partial lockdowns, the environment where vaccine expectations can continue is expected to favor value stocks centered on sensitive stocks for the time being," and forecasted, "It will be a week to focus on whether the spread of U.S. state lockdowns will continue, while weighing relief rallies and vaccine expectations."

Hana Financial Investment predicted that the KOSPI will move between 2450 and 2550 next week.

Researcher Lee Jae-sun of Hana Financial Investment judged, "There is a high possibility that the index will attempt to break through the yearly high led by foreigners." Although COVID-19 confirmed cases continue to increase, the development of a vaccine is coming into view, and expectations for economic recovery are being reflected in prices.

Regarding the high possibility of further KOSPI gains until the end of the year, Lee analyzed, "Expectations for global economic recovery are being reflected in emerging market stocks, and worldwide corporate profit growth in 2021 is certain," adding, "The annual operating profit of KOSPI in 2021 is estimated at 183 trillion won, expected to grow more than 37% compared to the same period last year."

He also judged that, compared to the rising phase from 2017 to 2019, there is a balanced distribution of industries. Researcher Lee said, "At that time, the industry leading the KOSPI rise was solely IT, but the current phase is evolving into a form where the index rise is not concentrated in specific industries," and added, "The market capitalization ratio of the so-called growth stock BBIG (semiconductors, batteries, internet, games) seven stocks within the KOSPI increased from 6.6% in 2017 to 16.4%."

Researcher Lee said, "There is a high possibility of additional foreign capital inflow due to the merit of won appreciation until the end of the year," and added, "In the current phase, which is the gateway to preparing for the 2021 earnings market, although upward revisions of 2021 earnings are observed, the rotation market of economically sensitive stocks that have not risen so far is likely to continue further."

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