[Good Morning Stock Market] Expectations for Additional US Stimulus and the 'Tesla' Effect... Focus on Foreign Investor Trends

US Major Stock Markets Close Up Over 1%... Nasdaq Index Up 2%
Focus on Foreign Futures Trends on Option Expiration Day, 13th

[Asia Economy Reporter Oh Ju-yeon] On the 12th (local time), the U.S. stock market closed higher, supported by additional stimulus package negotiations, easing concerns over U.S.-China trade friction, and Tesla's stock split. The Dow Jones Industrial Average closed at 27,976.84, up 1.05% from the previous trading day, the S&P 500 rose 1.4% to 3,380.35, and the Nasdaq surged 2.13% to close at 11,012.24. This is expected to be favorable for the domestic stock market as well, and considering the options expiration on the 13th, there is an analysis that attention should be paid to foreign investors' futures trends.

On the 11th, when the KOSPI index surpassed the 2,400 mark for the first time in 2 years and 2 months, dealers were working in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Moon Honam munonam@

◆ Seo Sang-young, Kiwoom Securities Researcher = The U.S. stock market rose as large tech stocks, which had recently shown weakness, surged due to the Tesla effect. In particular, the partial easing of friction with China and the Democratic Party's partial concession on the amount in the ongoing deadlock over the additional stimulus package are also positive factors. Additionally, there were many favorable issues for investor sentiment, such as the stabilization of gold and silver, which had suddenly increased volatility the previous day, as well as international oil prices. This is positive for the Korean stock market.

Considering the options expiration, it is necessary to pay attention to foreign investors' futures trends. Especially since foreign investors have driven the index rise by net buying 37,000 contracts since the June expiration. The weak dollar is positive in that it raises expectations for foreign investors' net buying. However, despite the recent continued dollar weakness, the inflow of funds into emerging market ETFs has not been significant, showing a different pattern from the past. This is presumed to be the result of concerns about the U.S. economy rather than the dollar weakness being due to a spread of risk asset preference. Accordingly, expectations for active net buying by foreign investors may weaken, limiting the index's rise.

◆ Kim Il-gu, Hanwha Investment & Securities Researcher = When thinking about scenarios for the future global economy, there could be a first path where economic activities normalize after escaping the virus risk, a second path where the economy falls into a long-term recession due to the global pandemic, and a third path where the current state continues, neither full normalization nor long-term recession, which is somewhere between the first and second paths.

In the first case, it would be wise to sell stocks that have risen a lot and buy those that have not risen, and investors' obsession with momentum would decrease. In the second case, it would be difficult to avoid a general decline in the stock market, with heavily risen stocks falling significantly, so momentum obsession would also be abandoned.

However, in the third path, the current phenomenon where what is not working continues not to work and what is doing well continues to do well will persist, and investors' obsession with momentum will also continue. We expect the path to be determined by how effective the vaccines currently in clinical trials will be.

◆ Lee Eun-taek, KB Securities Researcher = We raise the KOSPI target from the previous 2,360 to 2,570. Although a correction is expected in the fall, the long-term upward trend is not expected to be damaged. There are many uncertainties that could trigger short-term corrections around the fall. From a macro perspective, the U.S. presidential election and concerns about a second pandemic are risk factors. The U.S. presidential election is expected to be a close race between Biden and Trump, and weakened immunity during the seasonal change could cause an increase in COVID-19 deaths.

From a supply-demand perspective, attention should be paid to events that could affect individual investors. These include the lifting of the short-selling ban (September) and the strengthening of major shareholder requirements (October-November). Depending on policy direction, selling by individuals may occur, leading to a correction mainly in small and mid-cap stocks. In the short term, risks of interest rate increases may also appear in the fall depending on oil price trends. However, even with corrections, the possibility of a sharp drop (-12% or more) in the KOSPI is low. The gap between the real economy and stock prices is not judged to be at a serious level.