[Good Morning Stock Market] US Biden's 2nd Stimulus Package Announcement Countdown... Impact on Domestic Stock Market?

[Asia Economy Reporter Park Jihwan] As the Biden administration in the United States is about to announce its second economic stimulus plan worth $3 trillion (approximately 3,400 trillion KRW) this week, there is growing interest in how it will affect the domestic stock market. Experts advise focusing on policy beneficiary stocks such as infrastructure and eco-friendly sectors. Regarding concerns about tax increases to fund the large-scale infrastructure investment, the general opinion is that a phased tax increase will not have an immediate negative impact on the market.

◆ Yumi Kim, Researcher at Kiwoom Securities = The Korean stock market is expected to rise, supported by the inflow of optimism from the Biden administration's infrastructure stimulus plan. However, discussions about tax increases to secure funding may act as a burden, so a sideways movement within a range is anticipated.

On the 25th, President Biden mentioned in his first official press conference since taking office that an announcement regarding the infrastructure stimulus plan would be made this week. The stimulus, expected to be a mega-scale package of $3 to $4 trillion, will focus on transportation infrastructure, eco-friendly projects, and education support. Optimism is expected to flow into related sectors accordingly.

Additionally, the Biden administration will release priority policies for the 2022 budget during the week. Other major events include the U.S. employment report on April 2, key manufacturing Purchasing Managers' Index (PMI) indicators from major countries, and the April OPEC+ meeting. The U.S. employment report and manufacturing PMI are expected to show favorable results, which may cause the recently stabilized long-term U.S. bond yields to rise again. Although rising interest rates could burden the stock market, the Federal Reserve's recent reaffirmation of a dovish stance and the market's adaptation to interest rate issues are expected to limit negative impacts. The Korean stock market is expected to fluctuate between 2950 and 3100 points.

◆ Hyunki Chae, Researcher at Cape Investment & Securities = This week, the KOSPI is expected to fluctuate between 2980 and 3130 points. The upward factors include expectations for the Biden administration's infrastructure investment announcement and strengthening economic recovery momentum. Downward factors include conflicts between the U.S. and China and concerns about supply disruptions due to the Suez Canal incident.

The Biden administration's infrastructure investment plan has been projected to increase from $2 trillion immediately after the election to $3 trillion in early March, and currently up to $4 trillion. It is a critical time to see whether expectations for accelerated economic recovery centered on the U.S. due to large-scale infrastructure investment will expand. At the same time, market attention is expected to focus on the level of tax increases needed to fund this unprecedented large-scale infrastructure investment. Since the COVID-19 pandemic, the U.S. has implemented a large-scale fiscal policy amounting to about 25% of GDP. Considering additional stimulus measures such as infrastructure investment, tax increases have become inevitable to cover the fiscal deficit.

The U.S. 10-year bond yield has not fallen below the 1.6% level but after trying a short-term peak at the 1.7% level, the rapid rise has calmed down. Market participants seem to be adapting to the current interest rate level. The recent underperformance of the domestic stock market compared to the U.S. market is believed to be due not only to external issues but also to the resurgence of caution as the first-quarter earnings season approaches amid unresolved interest rate concerns. For a clear direction to emerge, visibility of earnings must be secured, so attention should be paid to March export results this week, which can gauge the first-quarter earnings of domestic listed companies.

◆ Sanghyun Park, Researcher at Hi Investment & Securities = President Biden is expected to simultaneously pursue tax increases to fund the infrastructure investment package. The push for tax increases may have somewhat mixed effects on the financial market. First, it will inevitably have a negative psychological impact on the stock market. If corporate tax increases become a reality, corporate profits will inevitably be adversely affected.

However, despite concerns about tax increases and additional interest rate rise risks, the infrastructure investment package that President Biden aims to promote is expected to have a positive impact on the stock market. The reasons are: first, it acts as another catalyst for industrial paradigm shifts; second, it creates a trickle-down effect from the U.S. economic boom; third, even if tax increases become a reality, the negative impact of tax increases may not become visible immediately. Considering the U.S. economic situation and congressional opposition, tax increases are expected to be implemented with a time lag, and the level of tax increases may be lower than initially pledged, which could somewhat mitigate the tax increase risk.

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