[Good Morning Stock Market] Market Escapes Extreme Pessimism... 'Gaemi' Victory Report Expected

[Asia Economy Reporter Oh Ju-yeon] On the 25th, the KOSPI rose 5.9% and the KOSDAQ index rose 5.3%, closing with a simultaneous increase. Although foreign investor demand has not fully returned, the record recovery of the key index level of 1700 points continued, leading to an assessment that the market has escaped from an extreme panic phase. Externally, the U.S.'s full-scale stimulus measures and internally, the all-out participation of individual investors reminiscent of the 'Donghak Peasant Movement' acted as catalysts for the market rebound.

◆ Kim Yong-gu, Hana Financial Investment Researcher = The domestic stock market has seen a trend of love calls from individual investors. Since the beginning of the year, individuals have maintained a monumental buying spree totaling approximately 21.8 trillion KRW, with 19.1 trillion KRW accumulated in the KOSPI and 2.7 trillion KRW in the KOSDAQ market. Customer deposits also surged dramatically from about 28.5 trillion KRW at the end of last year to 39.9 trillion KRW on the 23rd, indicating that the remarkable momentum of individual investors in the domestic stock market is far from over.

Typically, individual demand has always moved counter to the direction of the KOSPI and KOSDAQ indices, marked by accumulated trauma and failures, resulting in extreme distrust toward the market and experts, making this behavior somewhat unusual. The unprecedented system risk outbreak period has been, in the mid-to-long term, an opportunity to buy undervalued national representative stocks, based on past experience, and the sharp cooling of the real estate market following increased government regulations has accelerated the shift of household assets into the stock market.

From a problem-solving perspective, the revival of foreign investors' love calls for cash and futures will be key to market normalization, but it is clear that the potential downside buffer and upward momentum have been further strengthened due to the 'Buy Korea' movement by individual investors. This is why extreme market pessimism is now seen as a phase that is entirely unproductive.

Ultimately, a market trend where retail investors win is anticipated. It is expected to be a historic turning point for the Korean capital market, shaking off individual and household neglect of large-cap KOSPI stocks and distrust toward indirect investment institutions such as active funds.

◆ Seo Sang-young, Kiwoom Securities Researcher = The U.S. stock market rose in response to the U.S. Congress's agreement on fiscal spending, Nike's solid earnings report, remarks by former Fed Chairman Bernanke, discussions between Pompeo and Bin Salman on oil price stabilization, and positive news from individual companies. However, some Republican senators demanded revisions to the fiscal spending bill, particularly regarding enhanced unemployment insurance, citing institutional errors, which could delay the bill's passage, leading to a mixed close. Additionally, the rapid increase in COVID-19 cases, the resulting burden on corporate earnings, and labor market contraction also had an impact.

Until now, extreme volatility in the U.S. stock market has made market access burdensome for investors. However, the Federal Reserve and central banks and governments worldwide have implemented proactive and swift monetary and fiscal support policies, providing reassurance to market participants. This is positive for emerging markets such as the Korean stock market.

Of course, considering that most of the factors driving today's U.S. stock market rise were already reflected in the Korean stock market the previous day, the possibility of profit-taking cannot be ruled out. However, international oil prices and foreign exchange market stability continue, and Micron's strong earnings report after market close, which led to nearly a 6% surge in after-hours trading, is also positive. Meanwhile, in the U.S. stock market, stocks that had driven the previous decline rebounded strongly, while stocks that had risen or had limited declines fell. This trend is expected to continue in the Korean stock market, suggesting differentiation among individual stocks.