[Weekly Market Outlook] Foreigners Also Start Buying... Liquidity Market Revives Again

Daily New COVID-19 Cases in Korea Drop to Single Digits
Expectations for Economic Activity Resumption with Government Support for Key Industries
US Stock Market Also Anticipates Rebound...Various Indicators and Corporate Earnings Are Variables

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] The KOSPI index recovered to the 1900 level for the first time in a month due to improved investor sentiment. In particular, the rise appears to have been further amplified as foreigners switched to net buying after 30 trading days. Although there will be volatility due to the impact of the novel coronavirus infection (COVID-19), it is expected that the upward trend will continue for the time being.

According to the industry on the 19th, foreigners net bought 322.6 billion KRW in the KOSPI market on the 17th. This ended a 30-trading-day streak of net selling that had continued since the 5th of last month. The cumulative net selling amount during this period was 14.7649 trillion KRW. The domestic stock market trend and foreigners’ trading patterns generally aligned. On that day, the trading volume in the KOSPI market reached a record high of 13.9632 trillion KRW. This is why there are forecasts that an upward market may appear in the future.

Kim Yae-eun, a researcher at IBK Investment & Securities, said, "Although anxiety surrounding COVID-19 still exists, the market is expected to rise if the supply and demand environment improves due to abundant liquidity," adding, "There will be volatility depending on the impact of COVID-19, but the index is expected to move with an upward direction for the time being."

◆ COVID-19 Subsides and Government’s Support Measures for Key Industries = In fact, COVID-19 is also on a downward trend. According to the Central Disease Control Headquarters (CDCH), as of midnight on that day, the number of confirmed COVID-19 cases increased by 8 compared to the previous day at midnight. The daily new confirmed cases, which were around 100 at the end of last month, dropped to single digits. This is the first time since February 18th based on the CDCH announcement. As a result, the total number of confirmed COVID-19 cases was tallied at 10,661.

Moreover, if various government stimulus measures are added, there is a forecast that the stock market could revive. The government plans to discuss measures for key industries at the 5th Emergency Economic Measures Meeting chaired by President Moon Jae-in this week. This is separate from the more than 100 trillion KRW worth of livelihood and financial stability policies and aims to support key industries such as aviation and refining, which have been directly hit by the impact of COVID-19. A plan to provide government guarantees of around 20 trillion KRW for corporate bonds of key industries is under review.

◆ US Stock Market Also 'Stirs' on Expectations of Economic Activity Resumption = In the United States, signs are emerging that the spread of COVID-19 is calming down. Although the number of infections is still large, there is a forecast that the worst situation has been avoided. New York Governor Andrew Cuomo said at a press conference on the 18th (local time), "We can claim that the COVID-19 increase curve has passed its peak and started to decline over the past three days," adding, "This is very good news." In fact, the number of COVID-19 deaths in New York increased by 540 in one day, which is 90 fewer than the previous day. This is also the lowest number this month. Last week, US President Donald Trump announced gradual economic normalization guidelines and recommended sequentially resuming economic activities starting with regions in good condition.

In the New York stock market, hopes for the resumption of economic activities are becoming visible, which is why there is a forecast that investor sentiment will recover. However, corporate earnings announcements and major economic indicators may still stimulate market volatility. In the four weeks up to the 11th, the number of new unemployment insurance claims in the US was about 22 million, the highest ever. The April manufacturing and services Purchasing Managers’ Index (PMI) and March durable goods orders in major economic zones such as the US, Europe, and Japan are also expected to act as variables.

Researcher Kim said, "As the spread of COVID-19 slows down in the US and Europe, governments are announcing phased economic normalization guidelines," explaining, "Although the economy weakened by the normalization measures will not immediately recover, it can alleviate fear sentiment." She added, "Since the economic slowdown caused by COVID-19 is an unavoidable fact, the market is reacting to positive factors, and ultimately, the liquidity released as the spread of COVID-19 eases will act as a factor for index rises."