[Weekly Market Outlook] Investment Interest Already in October Amid Wait-and-See... "Focus on Sectors"

[Asia Economy Reporter Oh Ju-yeon] As the US stock market has been undergoing a correction since September and the domestic stock market's previous sharp rise has slowed, there is an analysis that buying momentum may flow back in the fourth week of September, anticipating events scheduled for October.

On the 20th, NH Investment & Securities projected the KOSPI expected band for the next week to be between 2350 and 2450. They explained that the Korean New Deal policy, expectations for the development of a novel coronavirus (COVID-19) vaccine, and abundant stock market standby funds are factors driving the rise. However, they pointed out that the increased volatility of US tech stocks is an element to be cautious about.

Recently, investor deposit funds, which are standby funds for the stock market, reached 56.7 trillion won (as of the 15th). Following Kakao Games this month, large initial public offerings (IPOs) such as Big Hit Entertainment are scheduled for October, raising the possibility of additional inflows from individual investors into the stock market.

Kim Young-hwan, a researcher at NH Investment & Securities, explained, "Some of the subscription deposits aimed at large IPOs have flowed into stock market standby funds, significantly increasing the standby funds in the stock market."

Additionally, in October, funds related to the K-New Deal index will be launched, which could again draw attention to related industries.

Researcher Kim said, "On the 7th, the Korea Exchange released the KRX BBIG K-New Deal Index, and plans to launch an exchange-traded fund (ETF) tracking this index in October," adding, "Interest in policy themes related to the Korean New Deal is expected to rise."

He emphasized, "In particular, the KRX BBIG K-New Deal Index is composed using an equal-weight method, which is advantageous for small and mid-cap stocks within the index. Recently, as volatility in large US tech stocks has increased, the rise of large growth stocks in Korea has slowed. Since the Korean New Deal index is also composed in a way favorable to small and mid-cap growth stocks, a preference for small and mid-cap stocks within growth stocks has appeared since September, so it is necessary to pay attention to this trend."

Hana Financial Investment set the expected KOSPI band for the next week at 2370 to 2460. They explained that it is likely to be a range where a wait-and-see sentiment prevails due to uncertainty over the passage of US fiscal policy. However, they assessed that the relatively favorable pace of recovery in China's fundamentals is likely to act as a factor supporting the lower bound of the stock market.

Lee Jae-sun, a researcher at Hana Financial Investment, said, "An event that the market is likely to focus on in the future is the passage of the 5th US congressional stimulus package, which Chairman Powell also mentioned as necessary," adding, "The US fundamentals are currently showing a half recovery."

Lee explained, "As expectations for the policy fade, the stock market is likely to go through a process of digesting profit-taking selling accordingly. However, in the case of emerging markets, it is necessary to pay attention to the fact that the pace of improvement in China's fundamentals is faster compared to developed countries."