[Good Morning Stock Market] Variant Corona, Trump's Tantrum, Major Shareholder Confirmed... KOSPI Hits 2800, Will It Rise More by Year-End?

[Asia Economy Reporter Oh Joo-yeon] There are 3 trading days left until the stock market closes this year. With the KOSPI closing at a record high of 2806.86 on the 24th, just before Christmas, attention is focused on the market direction during the remaining trading days. In the securities industry, due to issues such as the resurgence of COVID-19, the emergence of variants, and the delay in U.S. President Donald Trump's signing of the 2021 fiscal year budget, the emphasis is on a market correction rather than further gains at the year-end. The finalization of the major shareholder requirements on the 28th is also attracting attention as it could increase market volatility.

◆ Han Dae-hoon, SK Securities Researcher = The $900 billion fifth stimulus package, which the U.S. Congress barely agreed on, has hit a roadblock. President Trump rejected the stimulus package, demanding a revision to increase the COVID relief payment from $600 to $2,000. If President Trump does not sign the bill by the 28th, the federal government will shut down. Whether the revised bill will be processed and the scale increased is one of the biggest concerns at the end of this year.

Amid growing concerns about the variant virus, attention is also focused on the news that global pharmaceutical companies have begun testing the efficacy of vaccines against the variant virus. At this point, with news of COVID-19 vaccine development and approval, whether existing vaccines prove effective against the variant virus is very important as it is linked to expectations for the resumption of economic activities. Pfizer and BioNTech are currently testing whether their vaccine can handle the variant virus and have stated that at least two more weeks are needed. Moderna has also announced that it will conduct additional tests over the coming weeks. Since the variant virus is known to be over 70% more infectious than the original virus, the vaccine's efficacy is a critical point to watch.

Ultimately, COVID-19, which has had the greatest impact on the market this year, and Trump's obstinacy have emerged as important variables through the remaining year-end and early next year.

◆ Oh Tae-dong & Kim Young-hwan, NH Investment & Securities Researchers = The three pillars driving the stock market rally (monetary policy, fiscal policy, and vaccines) are expected to act favorably. Vaccines will play a role in preventing downside risks, and policy expectations will create an environment for upward momentum. However, around March next year, doubts about both monetary and fiscal policies are likely to arise, possibly marking the end of the first phase of the N-shaped rally.

If U.S. long-term bond yields rise faster than expected, the first peak could come earlier. Considering that governments worldwide are focusing more on real economic recovery than asset bubbles and that expectations for increased fiscal investment in environmental industries continue, the risk premium on stocks is being reduced, and the 2021 KOSPI target is being raised to 3,000 points. There is also a high possibility of further upward revisions depending on the situation.

In the second half of 2021, the expansion of green investments by governments worldwide will not be just a short-term stimulus but could serve as a starting point for the strong performance of growth stocks in the green sector over the coming years. This recalls the shipbuilding rally triggered by order surprises in the mid-2000s. From 2005 to 2007, Korean shipbuilding stocks experienced a big rally thanks to order surprises. If financial markets begin to trust governments' investments in environmental sectors, related industries and stocks are likely to show stock price movements similar to those of the shipbuilding industry.

◆ Lee Eun-taek, KB Securities Researcher = The KOSPI, which has surged sharply in the short term, is expected to enter a short-term lull around the year-end and New Year due to the exhaustion of factors such as vaccines and additional stimulus packages. Although there are positive factors like the accommodative Federal Open Market Committee (FOMC) and additional stimulus packages, these have already been priced in, so they will be interpreted as factor exposure. However, it is not considered a situation requiring profit-taking. Liquidity and investor sentiment are strong, so without a 'definite negative factor,' a sharp drop in stock prices is unlikely, and expectations remain for a stock market rally event in January.

There are two positive factors that will lead the market rebound in January. First is the Q4 earnings announcements. Although earnings estimates have been significantly revised upward, KB Securities' analysis shows they are still not aggressive enough. Therefore, excluding one-off factors in Q4, the results will likely be a surprise, and corporate earnings guidance will be given very aggressively.

Along with this, there is also anticipation for President Biden's inauguration. In particular, Biden has pledged to introduce strong policies within his first 100 days in office. Notably, he plans to end the impact of COVID through '100 million vaccine doses/mask usage' and to hold a 'World Climate Summit' within 100 days of inauguration to announce accelerated eco-friendly policies. This will add positive momentum to the stock market.

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