[Good Morning Stock Market] Impact of Novel Coronavirus... Could Concerns Spread to Economic Slowdown?

[Asia Economy Reporter Oh Ju-yeon] Due to the impact of the novel coronavirus infection (Wuhan pneumonia), economic growth forecasts for various countries are being lowered. Moody's Analytics has cut its global economic growth forecast for this year by 0.3 percentage points, from 2.8% to 2.5%, and Goldman Sachs predicts that if the spread of the novel coronavirus continues until March this year, the global annual growth rate will decrease by 0.3 percentage points. There is also analysis that the novel coronavirus could constrain South Korea's economic recovery. In the stock market, while the fear of the infection is likely to have passed its peak, it is expected to take some time before economic stabilization can be confirmed.

◆ Seo Sang-young, Kiwoom Securities Researcher = The Korean stock market is expected to move within a box range due to ongoing uncertainties surrounding the novel coronavirus. Recently, there was a rebound buying trend as opinions gained attention that the coronavirus would be a short-term risk factor, but for further upward momentum, it is judged that the uncertainty needs to be resolved. Therefore, until meaningful news related to the novel coronavirus emerges, the domestic stock market is expected to move within a box range without a clear direction.

This week, attention should be paid to remarks by Jerome Powell, Chairman of the Federal Reserve (Fed). At the Federal Open Market Committee (FOMC), he had stated that the novel coronavirus was a serious issue, and recently its impact has been expanding. It will be important to see whether, as the market expects, he will claim that the economy remains solid "nevertheless," or argue that "because of this," caution is needed in assessing the economy. Additionally, with the options expiration date approaching, foreign investors' futures trends could lead index changes, so related supply and demand should also be monitored. Considering these factors, the KOSPI is expected to fluctuate between 2180 and 2250 points, and the KOSDAQ between 650 and 680 points.

◆ Kim Yong-gu, Hana Financial Investment Researcher = The market during the February options expiration week (13th) is expected to continue a limited buying-favored supply and demand flow due to foreign investors passing the selling climax in index futures and a directional shift in securities program cash trading. The supply and demand burden of foreign investors and securities cash-futures, which had concentrated inflows in the fourth quarter of last year, has been significantly alleviated after a sell-off process following the outbreak of the novel coronavirus. Although the all-out selling offensive has ended, the recovery of market sentiment is likely to appear slowly and reflexively. The current foreign investor positions, situated between the bottom and rebound, will materialize as a market response of self-help by internal cash-futures linked supply and demand sources, led by financial investment.

◆ Lee Kyung-min, Daishin Securities Researcher = The fear caused by the novel coronavirus is likely to have passed its peak. The daily increase in confirmed cases, which had reached 4,000, dropped to the 2,900 range on February 7. With the global spread being limited, the virus's spread rate has somewhat slowed 14 days after China imposed movement restrictions in the Wuhan area on January 23. What now requires attention are the changes that will arise due to the novel coronavirus.

First, attention is paid to the fear of the novel coronavirus spread and the counter-effect of economic instability caused by it. China has implemented large-scale liquidity supply and plans to announce large-scale economic stimulus policies at the National People's Congress in early March. Major global countries, including the United States, are also considering accommodative monetary policies and strong economic stimulus measures. The determination of major countries to minimize economic shocks enhances the stability of global financial markets. Unexpected large-scale liquidity supply and stronger-than-expected economic stimulus policies by major countries are favorable for the global investment environment. Once the fear of the infectious disease subsides, the global stock market's upward trend is expected to gain momentum.

However, a period of patience is necessary for the time being. This is because there is a time lag until economic stabilization and normalization can be confirmed through economic indicators after the infectious disease fear subsides. Rather, caution is advised regarding the negative impact on January and February economic indicators caused by strong measures taken by China and other major global countries to prevent virus spread. In particular, survey indicators released from mid-January are likely to have reflected extreme fear and economic instability. During the process of confirming the novel coronavirus fear through economic indicators, the KOSPI is expected to experience short-term sharp fluctuations accompanied by volatility. A strategy of increasing exposure by utilizing volatility rather than chasing purchases is effective.