[Good Morning Stock Market] "Stock Market Strongly Reflecting Expectations of Economic Recovery"

On the 4th, the KOSPI index started at 2181.64, up 34.64 points (1.61%) from the previous trading day, continuing its strong trend as dealers work in the Hana Bank dealing room in Euljiro, Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Kum Boryeong] The global economy is still affected by the novel coronavirus disease (COVID-19), but the stock market strongly reflects expectations for economic recovery. In South Korea, the KOSPI index surpassed the 2150 level on the 4th. However, questions are arising about the path it has taken.

◆ An Soeun, Researcher at IBK Investment & Securities = Although there are various risk factors such as the US-China dispute and the resurgence of COVID-19, they are currently considered to be below the surface. Instead, strong stimulus policies are supporting expectations for economic recovery. Additional fiscal policies have been introduced in places like South Korea and Germany, and the fifth US economic stimulus package is being discussed. Ahead of the June Federal Open Market Committee (FOMC) meeting, market expectations for new policy tools from the US Federal Reserve (Fed) and pressure from the Trump administration continue.

However, it is necessary to consider whether the economic recovery path reflected by the market can materialize. Economic indicators and corporate earnings estimates are expected to continue rebounding as economic activities resume in each country, but the strength and slope may weaken. Looking at China's PMI, which shows a leading indicator of the post-COVID-19 path, a stagnation period after a sharp rebound can be confirmed.

◆ Seo Sangyoung, Researcher at Kiwoom Securities = The Korean stock market yesterday remained slightly firm as profit-taking sales emerged. However, sectoral differentiation continued, showing a rapid rotation movement, which was a notable feature.

At the European Central Bank (ECB) monetary policy meeting, President Lagarde mentioned economic recovery but noted that the improvement was minimal and uncertainty remains high, which is also a burden. Recently, Federal Reserve Chairman Jerome Powell and most Fed members have talked about US economic recovery in the second half of the year but have continuously warned of doubts about the speed of recovery.

In particular, although central banks of various countries have argued the possibility of delayed economic recovery, the stock market has factored in a 'V-shaped' economic recovery as a given and surged, increasing the possibility of profit-taking sales, which is a burden on the Korean stock market.

Additionally, factors such as the cancellation of the OPEC+ (OPEC and non-OPEC oil-producing countries consultative group) meeting, the continued increase in COVID-19 cases in the US, and ongoing US protests causing concerns about consumption slowdown are also burdens that could impact the market. Considering this, the Korean stock market is expected to be sluggish today, but like the US stock market, a rapid rotation market with sectoral differentiation is expected to continue.