[Good Morning Stock Market] Expectation of Investor Sentiment Recovery as Omicron Concerns Ease... Selling Pressure Remains a Burden

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 23rd, the Korean stock market is expected to receive positive momentum from the U.S. stock market, which closed higher amid easing concerns over Omicron.

The three major U.S. stock indices in New York all closed higher. On the 22nd (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 261.19 points (0.74%) from the previous close to finish at 35,753.89. The large-cap focused Standard & Poor's (S&P) 500 index increased by 47.33 points (1.02%) to 4,696.56, and the tech-heavy Nasdaq index closed up 180.81 points (1.18%) at 15,521.89.

On the same day, the U.S. Food and Drug Administration (FDA) approved for the first time the use of Pfizer’s oral COVID-19 treatment pill at home in the U.S. President Joe Biden stated, "The FDA’s approval of the oral treatment is an important therapeutic measure to reduce hospitalization and mortality rates against the Omicron variant," adding, "We have secured 250,000 courses of the home-use oral treatment 'Paxlovid' for January next year alone."

However, concerns remain that changes in Federal Reserve (Fed) policy will pose a burden on the market next year. Experts on the New York stock market predict that market volatility may continue into next year. Chris Hersi, director at Goldman Sachs, analyzed, "As trading thins out ahead of the Christmas holidays, the market appears to be calming for the first time since Thanksgiving," adding, "The triple headwinds of virus spread, hawkish Fed, and difficult-to-understand fiscal stimulus are being absorbed into risk asset prices."

◆Sangyoung Seo, Researcher at Mirae Asset Securities= The rise in the U.S. stock market due to easing Omicron concerns and Tesla’s strength is expected to have a positive impact on investor sentiment in the Korean stock market. Although some of this was reflected the previous day, the strong performance of electric vehicle-related sectors could positively influence the secondary battery sector, which had been weak. Additionally, the continued rise in international oil prices is expected to have a favorable impact on related sectors.

The U.S. semiconductor sector saw profit-taking due to the hawkish Fed stance, and the vaccine sector remains weak due to the Pfizer treatment FDA approval and easing Omicron concerns, which poses a burden on the Korean stock market. However, most other sectors are expected to be positive. Reflecting this, the Korean stock market is expected to start with a rise of around 0.5% and then focus on foreign investor flows influenced by changes in the foreign exchange market.

◆Seheon Kim, Researcher at Kiwoom Securities= The Korean stock market is expected to continue its strong trend, supported by a robust U.S. consumer confidence index and easing concerns over the Omicron variant. The U.S. consumer confidence index’s surprise result is seen as a factor that alleviates recent economic uncertainties caused by the Omicron spread. Despite inflation and the resurgence of COVID-19, consumers expect an improved economic outlook, suggesting that consumption demand during the year-end shopping season is likely to be favorable. The sustained improvement in risk asset preference within the U.S. stock market amid various positive factors is also expected to positively influence the domestic stock market.

The recent weakening of the dollar is expected to increase the sustainability of foreign capital inflows. Additionally, the domestic bio sector, which showed weakness due to profit-taking pressure, is likely to see reduced selling pressure following the FDA’s approval of Pfizer’s COVID treatment.