[Weekly Market Outlook] Market Focuses More on 'COVID-19 Vaccine' Than '3-Step Elevation'

[Asia Economy Reporter Oh Ju-yeon] As the number of confirmed cases of the novel coronavirus infection (COVID-19) in South Korea exceeded 1,000 per day, calls for raising social distancing to level 3 are growing. However, market participants are paying more attention to the economic recovery next year due to COVID-19 vaccines rather than concerns about economic damage caused by strengthened social distancing, according to an analysis.

On the 20th, NH Investment & Securities forecasted that the KOSPI would move between 2700 and 2800 during the fourth week of December (21st to 24th). Expectations for U.S. economic stimulus and the expansion of COVID-19 vaccinations are factors driving the market up, but discussions about raising social distancing to level 3 due to the increase in domestic COVID-19 cases and noise related to vaccine side effects are factors pushing it down. In particular, the continuous spread of domestic COVID-19 cases is analyzed to potentially have a negative impact on domestic consumption in the future.

However, the market is diagnosed to be paying more attention to vaccine news than to the strengthening of social distancing. Although there was an evaluation that valuation pressure increased as the stock market rose sharply in November, raising the possibility of a short-term correction, last week the KOSPI showed only narrow fluctuations around the 2750 to 2770 range without indicating a clear direction.

Kim Young-hwan, a researcher at NH Investment & Securities, explained, "Although cyclical stocks have recently faltered due to the spread of COVID-19, the global economic recovery trend remains valid, and the expansion of vaccine vaccinations is considered a factor that strengthens this."

Researcher Kim maintained a positive view on semiconductors, chemicals, and transportation, but noted, "However, stocks related to face-to-face (contact) activities may be negatively affected in the short term by issues related to raising social distancing."

He also pointed out that November and December are generally periods when interest in dividend stocks increases, but this year, since November, dividend stock yields have underperformed the KOSPI yield, suggesting that investment targeting year-end dividends could be possible.

Hana Financial Investment forecasted that the domestic stock market would show a sector rotation market until the end of the year. The expected KOSPI range for next week was set at 2740 to 2800.

Lee Jae-sun, a researcher at Hana Financial Investment, analyzed, "Looking at the weekly returns of the KOSPI in December over the past 10 years, the market tends to show lower returns as it enters the third week of December. This is due to a decrease in trading volume ahead of year-end book closing and the dividend cut scheduled for the last week, which weakens momentum supporting supply and demand."

However, considering the positive views of institutions and foreign investors on global stock markets outside the U.S. next year and the supply and demand capacity of individuals maintaining customer deposits at around 60 trillion won, he said that expanding the proportion of risk assets looking toward next year is still a valid point in time.

Researcher Lee judged, "During the adjustment period, expanding the proportion of risk assets looking toward next year is still a valid point in time."

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