[Weekly Market Review] Market Led by Cyclical Stocks, KOSDAQ Touches 800 Level

Semiconductors, Automobiles, Steel, etc. Show Relative Strength
KOSDAQ Index Recovers Above 800 Since October 2018

Heightened Sensitivity to US-China Tensions, COVID-19 Resurgence
Will Earnings Season Trigger 'Profit-Taking' or Mark Another Upturn?

[Asia Economy Reporter Oh Ju-yeon] In the third week of July (20th-24th), the domestic stock market saw the KOSDAQ market relatively outperform the KOSPI market, successfully surpassing the 800-point mark on the KOSDAQ index for the first time in 1 year and 9 months. While non-face-to-face (untact) related stocks, which had been on an upward trend, took a breather in the KOSPI market, cyclical stocks stood out and drove the index.

Based on expectations for the development of a COVID-19 vaccine, additional US stimulus measures, and corporate earnings, the stock market rose early in the week but lost momentum toward the end of the week as attention shifted to the possibility of renewed US-China tensions. Analysts suggest this could also impact the market next week.

According to the Korea Exchange on the 25th, the KOSPI closed at 2200.44 on the 24th, up only 0.1% from 2198.20 at the close on the 20th. While most of the top market capitalization stocks showed weakness, cyclical stocks such as semiconductors, automobiles, and steel stood out.

On the 21st, the KOSPI closed at 2228.83.

In particular, Hyundai Motor Company steadily rose after a sharp 6.82% jump to 117,500 KRW on the 17th, closing at 122,500 KRW on the 24th, up 4.26% over the week.

POSCO's stock price rose despite reporting its first-ever quarterly loss in Q2. According to the Financial Supervisory Service's electronic disclosure system, POSCO's consolidated sales for Q2 this year decreased by 15.9% year-on-year to 13.7 trillion KRW, and operating profit fell 84.3% to 167.7 billion KRW. On a separate basis, sales dropped 21.3% to 5.9 trillion KRW, and operating loss turned to a deficit of 108.5 billion KRW. However, the stock price rose 3.47% from 187,500 KRW at the close on the 20th to 194,000 KRW at the close on the 24th, even surpassing 200,000 KRW intraday on the 22nd.

The stock price increases of Hyundai Motor and POSCO were supported by foreign and institutional investors, respectively. From the 20th to the 24th, Samsung Electronics was the top stock purchased by foreigners, followed by POSCO in second place. Institutions ranked Samsung Electro-Mechanics, SK Innovation, and Hyundai Motor as their top three purchases.

The KOSDAQ index showed strength by recovering above 800 for the first time since October 2018, closing at 801.69 on the 23rd. The pharmaceutical and bio sectors led by COVID-19 vaccine, treatment, and diagnostic kit-related stocks showed strong performance.

Among the top market capitalization stocks, Seegene's rise was particularly notable. On the 23rd, Seegene reached an intraday high of 224,000 KRW, setting a 52-week high. Considering that its stock price was in the low 30,000 KRW range in early February before the COVID-19 outbreak, this represents about a sevenfold increase.

EcoPro BM, listed on the KOSDAQ and related to secondary batteries, also showed strength following Tesla's fourth consecutive quarter of profitability. It reached an intraday high of 146,700 KRW, setting a 52-week high.

Points to watch next week include the potential expansion of US-China tensions, the resurgence of COVID-19, and the Federal Open Market Committee (FOMC) meeting scheduled for the 29th.

Lee Kyung-min, a researcher at Daishin Securities, said, "For the first time since the resumption of economic activities, a resurgence in COVID-19 cases is being detected," adding, "Concerns over a slowdown in Europe's economic recovery following the US due to the COVID-19 resurgence are increasing the burden on global financial markets."

Regarding the FOMC meeting, the researcher explained, "There will be no change in the monetary policy stance, but it could serve as a moment to recognize the gap between market expectations and reality again." He also noted, "The July Conference Board Consumer Confidence Index should also be monitored; if it falls short of expectations, debates over the pace of economic recovery could intensify."

He continued, "The key in the upcoming earnings reports from domestic NAVER and US companies Apple, Google, and Amazon will be market perception," forecasting, "It will determine whether these serve as a pretext for profit-taking or mark the beginning of a new upward trend."