[Weekly Market Outlook] KOSPI Depends on COVID-19 Spread and Economic Indicators from the US and Others

On the 25th, KOSPI closed at 1704.76, up 94.79 points (5.89%) from the previous trading day, amid expectations of global stimulus policies. Dealers are working at Hana Bank in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Park Jihwan] This week (March 30 to April 3), the domestic stock market is expected to be significantly influenced by the global spread of the novel coronavirus infection (COVID-19) and the release of major economic indicators from key countries such as the United States.

As the spread of COVID-19 rapidly accelerates in the US and Europe, attention is focused on the extent to which the pandemic has affected major economic indicators in each country.

According to the Korea Exchange on the 29th, last week the KOSPI closed at 1717.73, up 9.68% from the previous week, and the KOSDAQ ended at 522.83, rising 11.78%.

Particularly, attention is drawn to the major US indicators to be announced this week. The US March nonfarm payroll changes, unemployment rate, and average hourly wages will be released one after another.

The market consensus for the US March Institute for Supply Management (ISM) manufacturing index, scheduled for release on April 1, is expected to fall 4.6 points from the previous month to 45.5. The US March ISM non-manufacturing index, to be announced on April 3, is also forecasted to drop 8.8 points from the previous month to 48.5. The March nonfarm payroll change is expected to record a negative (-) 61,000, marking the first decline since the 2008 financial crisis.

Kim Yonggu, a researcher at Hana Financial Investment, explained, "Considering the global economic activity shutdown after the COVID-19 virus and the worsening financial difficulties of companies and households, a comprehensive retreat in major countries' economic indicators for March is inevitable."

Han Daehun, a researcher at SK Securities, also said, "March economic indicators are being released in the US and Europe, where the COVID-19 spread was significant," adding, "The likelihood that most indicators will be weak is a burden."

The securities industry expects the KOSPI to move between 1660 and 1800 points this week. Although the US has announced a massive economic stimulus package, the key to stock market stability will be the containment of the COVID-19 situation.

Kim Byungyeon, a researcher at NH Investment & Securities, said, "The domestic stock market is showing a rebound after a sharp decline," adding, "The Federal Reserve's measures to ease liquidity shortages and the US Congress's approval of fiscal policies are factors that alleviate fear."

He explained, "The KOSPI is supported by the US Federal Reserve's accommodative monetary policy, policy coordination among countries, and the US's large-scale fiscal policy, while downside risks include credit risk concerns and short-term money market liquidity tightening."