[Weekly Market Review] Stock Market Escapes Worst Amid Massive Economic Stimulus

[Image source=Yonhap News]

[Asia Economy Reporter Jihwan Park] Summarizing the domestic stock market this week (March 23 to March 27) in one sentence, the market has at least escaped the worst situation thanks to large-scale domestic and international economic stimulus measures to overcome the novel coronavirus disease (COVID-19) and the government's 100 trillion won financial market stabilization plan.

According to the Korea Exchange on the 28th, the KOSPI closed at 1717.73, up 9.68% from the previous week, and the KOSDAQ closed at 522.83, up 11.78%.

Although institutions and foreigners sold a net 35.9 billion won and 1.6413 trillion won respectively on the KOSPI, individuals bought 1.7756 trillion won. Similarly, on the KOSDAQ, institutions and foreigners sold 114.2 billion won and 332.4 billion won respectively, but individuals purchased 441.3 billion won.

This week, the domestic stock market, which had been falling endlessly, showed signs of stabilization. The KOSPI index, which had fallen below the 1500 mark on the 23rd, recovered to the 1700 level. The KOSDAQ, which had dropped below 450, also rose to the 520 level.

Positive factors included the unlimited increase in the U.S. Federal Reserve's quantitative easing (QE) scale, the government's announcement of a 100 trillion won financial market stabilization plan, and the Bank of Korea's plan to purchase large amounts of repurchase agreements (RPs) once a week for three months, raising expectations for liquidity supply.

The domestic stock market did not start well this week. On the 23rd, the KOSPI and KOSDAQ closed down over 5% due to the U.S. Senate's rejection of the COVID-19 relief bill and concerns over the oil war among oil-producing countries.

On the following day, the 24th, the KOSPI and KOSDAQ surged over 8%, marking a turnaround. This was driven by the U.S. Federal Reserve's announcement of unlimited quantitative easing policies, including expanded corporate bond purchases, which acted as a positive factor for the stock market. Additionally, the government's announcement of a securities market stabilization fund helped expand the gains.

On the 25th, as policy responses for economic stimulus by various countries became more active, the KOSPI continued a strong rebound for two consecutive days, recovering to the 1700 level. The KOSDAQ index also maintained its upward momentum from the previous day, returning to the 500 level. Cyclical sectors such as steel, chemicals, and automobiles, which had experienced excessive stock price crashes, showed sharp gains.

On the 26th, the KOSPI rose to the 1730 level during the day but gave back most of the gains before the close, ending down over 1%. This was analyzed as a market decline due to cautious sentiment surrounding the U.S. unemployment claims report release.

On the 27th, the KOSPI rebounded again after two days, closing in the 1700 range. Although foreigners continued their selling streak for 17 consecutive trading days, individual investors' net buying led the index's rise.