[Good Morning Stock Market] Rising Expectations for COVID-19 Containment... Global Stock Markets Moving Toward Stability

[Asia Economy Reporter Park Jihwan] The U.S. stock market rose on expectations that the novel coronavirus disease (COVID-19) may have reached its peak. On the 8th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 23,433.57, up 779.71 points (3.44%) from the previous day. The Standard & Poor's (S&P) 500 index also closed at 2,749.98, up 90.57 points (3.41%) from the previous session.

Market sentiment was strongly influenced by hopes that the COVID-19 situation is showing signs of calming down, especially in regions where the virus had recently been concentrated, such as New York in the U.S., Italy, and Spain.

◆ Park Okhee, Researcher at IBK Investment & Securities = Considering that China and Korea began to see a weakening in the number of new COVID-19 cases between 20 to 30 days after the outbreak and a significant decrease around 50 days, it is judged that the spread period of COVID-19 by country is about 2 to 3 months. The U.S. is currently in the spread phase, and the increase in new cases is expected to slow around mid-April. During the SARS outbreak, no additional confirmed cases occurred about three months after the major spread began around the end of March 2003.

◆ Kim Ilhyuk, Researcher at KB Securities = It is now time to prepare strategies for the post-COVID-19 era. In the U.S. market, we expect stock price increases for companies that can continue share buybacks and have high growth potential. Due to the sharp slowdown in economic activity caused by COVID-19, companies' sales have plummeted, and the demand to secure cash has intensified. The scarcity of companies continuing share buybacks and dividends is increasing, leading to expectations of high performance. In the past 50 years, the S&P 500 index has fallen more than 30% only three times: Black Monday in 1987, the early 2000s IT bubble burst, and the 2008 global financial crisis. In all three cases, there was a clear phenomenon of 'relative outperformance of stocks with excessive declines' by sector. Due to COVID-19, the U.S. stock market has fallen up to -34% from its previous peak, and sectors with large declines in the recent downtrend include energy, finance, industrials, materials, and real estate. Among the stocks with excessive declines, we expect relative outperformance from those holding sufficient cash and whose profits continue to increase steadily despite weakening shareholder return policies.

◆ Kang Jaehyun, Researcher at Hyundai Motor Securities = The U.S. stock market, which had collapsed since February 19, is rapidly rebounding. Although the rebound speed is slower than the decline speed, the S&P 500 index rose 18.9% in less than three weeks (3/24~4/7). There are two main reasons for the rise. The first is the introduction of large-scale economic stimulus measures and expectations of demand recovery due to the slowdown in COVID-19 spread. The second is expectations of crude oil production cuts. We now judge that the possibility of a sustained rebound without a major correction has become quite high. Currently, the U.S. situation is similar to China in February, where the number of new COVID-19 cases has started to decrease. Although it is still early to be conclusive, it appears that the number of new COVID-19 cases in the U.S. peaked in April. Regarding this phenomenon, President Trump has expressed optimism, saying 'there is light at the end of the tunnel.' As the number of new COVID-19 cases in the U.S. begins to decline, the stock market is highly likely to continue its upward trend, so it is judged that investors can buy stocks with more confidence than before.