[Good Morning Stock Market] "Individual Buying Will Continue Due to COVID-19 Vaccine and Changes in Investment Environment"

Considering Stimulus Measures and Vaccine Development Speed
Uptrend Unlikely to Fade Quickly
Hana Financial Investment Forecasts "Moderate Rise to 2940 Level in January"

Korean Stock Market Tops Returns Among 47 Major Countries
Focus on European Markets as Brexit and COVID-19 Concerns Ease Next Year

[Asia Economy Reporter Minji Lee] As individual investors' active buying continues to drive the domestic stock market's upward rally, opinions suggest that considering changes in the investment environment and the speed of COVID-19 vaccine distribution, further gains are expected. Although bubble concerns persist across the market in the fourth quarter, the upward trend in indices is unlikely to fade quickly, supported by countries' stimulus measures to recover from the COVID-19 shock and the improving corporate earnings trend.

[Image source=Yonhap News]

Meanwhile, on the 29th (local time), the U.S. New York stock market saw all three major indices decline as expectations for increased nationwide cash payments diminished somewhat. The U.S. House of Representatives passed a bill to raise the nationwide cash payment from the existing $600 to $2,000 by a large margin, but the Senate has yet to approve it, and no decision has been made on whether to hold a vote in the future. Accordingly, the S&P 500 and Dow Jones indices each fell by 0.22%, while the Nasdaq index dropped about 0.38%.

◆ Daejun Kim, Researcher at Korea Investment & Securities = Reflecting the stock market's strength, I expect the upper band of the KOSPI next year to reach 3,100 points. Furthermore, in January, the KOSPI is projected to continue a moderate upward trend within the range of 2,740 to 2,940 points.

Since the fourth quarter, stock prices have surged sharply, sparking bubble concerns across the market. Various indicators suggest that the market has indeed entered a bubble phase, but as seen in past cases, even if a bubble forms, it does not burst immediately. Considering vaccine development, stimulus measures, domestic economic policies, corporate earnings improvements, and foreign capital inflows, the index level is expected to be higher than it is now.

On the 29th, when the KOSPI started weak, employees were working in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. On that day, the KOSPI index opened at 2,810.55, up 1.95 points (0.07%) from the previous day, and the KOSDAQ index opened at 928.58, up 1.58 points (0.17%) from the previous day. Photo by Hyunmin Kim kimhyun81@

Recently, vaccines have been distributed faster than expected, leading to rising expectations for economic recovery and rapid upward revisions of profit estimates. Expected inflation has also surpassed early-year levels, and oil prices have significantly recovered from the lows during the COVID-19 shock. Typically, during periods of rising prices and oil, cyclical sectors such as steel, chemicals, and materials have shown relative strength. Going forward, alongside the materials sector, IT sectors such as semiconductors, which are expected to benefit from the U.S.'s sanctions on China, are anticipated to be the focus of attention as beneficiary stocks.

◆ Byungkyu Min, Researcher at Yuanta Securities = Among 47 countries worldwide this year, South Korea had the highest returns. Of the 47 countries, 17 recorded positive returns, and among them, only six countries?including South Korea, Denmark, Taiwan, China, the U.S., and India?outperformed the Morgan Stanley Capital International (MSCI) World Index return of 12.8%. While it may seem that the global stock market has broadly recovered domestically, the boom appears concentrated in a few countries.

By sector, the IT sector showed the highest returns compared to the beginning of the year, at 43%. Consumer discretionary (32.5%) and communication (20.2%) sectors also showed strength. This reflects the benefit that untact (contactless) stocks gained due to the COVID-19 pandemic. On the other hand, energy (-31.4%), real estate (-10.3%), and financials (-7.4%) underperformed. Recently, these sectors have recorded high returns in the fourth quarter as vaccine development progressed and expectations for economic and monetary policy normalization were reflected.

The most underperforming stock markets this year were in Europe. Among 17 European countries included in the MSCI World Index, 11 posted negative returns this year. The German stock market, a core economy, also declined by 0.9% compared to the beginning of the year. This is attributed to the significant spread of COVID-19 within Europe and uncertainties related to Brexit.

However, since the vaccine development news, European stock markets have shown a strong rebound, raising expectations for future performance. Since late October, the MSCI Eurozone Index's return has been 24.4%, significantly outperforming the global stock market's 15.7%. Recently, uncertainties related to Brexit, which had long been an undervaluation factor, have been resolved, removing discount factors. Currently, the Eurozone stock market is discounted by approximately 24.3% and 2.8% compared to the U.S. and Japan, respectively, reflecting concerns about the second wave of COVID-19 and the possibility of a hard Brexit.

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