Vaccine Economy Stock Market Keyword 'Contact'

South Korea to Start Vaccinations on 26th
Service Stocks Expected to Gain Attention if Case Numbers Decline

[Asia Economy Reporter Hwang Junho] The stock market volatility has increased with the spread of the COVID-19 vaccine. As expectations for economic recovery grow, market interest rates have risen sharply, creating a new turning point in the stock market. It is expected that a full-fledged economic recovery phase will form once the decline in confirmed cases becomes clear. There is a forecast that interest will shift from the untact stocks that were spotlighted during the past year of COVID-19 to contact stocks where people meet face-to-face.

Start of the Vaccine Economy

On the 26th, Korea also began vaccine distribution, signaling the start of the vaccine economy. By 6 p.m. that day, 16,813 people had been vaccinated. Herd immunity is expected to be possible by November this year. The UK, having confirmed the vaccine's effectiveness, announced a phased lifting of lockdown starting with students returning to school in early March, while the US will begin vaccinating the general public in May to June.

With vaccination, the caution toward face-to-face contact is expected to disappear. Opportunities to meet people who could not be met due to social distancing and other measures have increased.

Disposable income of households has also increased due to COVID-19. In Korea, it increased by 5.4% in the second quarter of last year compared to the previous year, and in the US, it rose by 16.1% compared to April last year.

The savings rate has also grown. According to estimates by the Bank of Korea, it expanded from 6% in 2019 to 10% in 2020, and in the US, it rose from an average of 7% in previous years to 10% at the end of last year. The highest US savings rate was 34% in April last year, when the economy panicked due to COVID-19.

Shall We Go Out?

Kim Dami, a market researcher at Shinhan Financial Investment, analyzed, "The decrease in household consumption due to COVID-19 had a greater impact on services than goods, and on non-essential rather than essential consumption items. Face-to-face service sectors such as dining/accommodation and culture/leisure continued to show double-digit decreases compared to the previous year even in the fourth quarter of last year, in contrast to essential consumer goods or services."

Accordingly, she said, "Face-to-face sectors showed returns of less than +10% compared to early 2020, which is relatively low compared to growth stocks that rose from 50% to over 100% during the same period, indicating significant room for further growth. Once the effect of the decrease in domestic confirmed cases is confirmed, face-to-face sectors are expected to recover investor sentiment."

Lee Hyukjin, senior researcher at Samsung Securities, also forecasted, "When outings begin, the first thing to pay attention to is cosmetics," adding, "Especially since it is a global issue, attention should be paid to cosmetics ODM/OEM companies that supply various brands."

Lee Euntaek, stock strategy researcher at KB Securities, said, "For next month's recommended stocks, we focus on re-flation and earnings improvement stocks (financials + cyclicals), suggesting an increased weighting in insurance, chemicals, and semiconductors," and added, "As a niche sector, we recommend buying consumer discretionary stocks (media leisure/clothing/education) that tend to perform well in the mid-phase of the economic cycle."