Benchmark KOSPI may continue to rise
The benchmark KOSPI is unlikely to suffer a second big fall in the second half of 2020 and it is expected the stock index will be on stable track for a rebound after recovering from the coronavirus-driven turmoil, analysts said.
The main bourse bounced back to over 2,000 points at one time on Thursday. This was the first time since March 6 that the KOSPI topped the symbolic 2,000-mark. The index has suffered big setbacks over the past two months when the local economy has undergone a virus-induced panic, with domestic consumption and exports remaining in the doldrums amid pandemic fears.
The stock market tumbled to below the 1,500-range in midMarch when the virus shock reached its peak here. But it has since started showing signs of a slow yet steady recovery in line with the nation’s strong pump-priming measures and the declining numbers of new confirmed cases here.
Some critics argue that the local stock market may undergo a second collapse due to external shocks, as the global pandemic has not come to a complete end and Western countries are still facing growing challenges in fighting the rapid spread of COVID-19 there.
But most analysts said chances are slim that the KOSPI will suffer another big shock in the near future.
“The key lies in whether there is a second wave of coronavirus infections in Korea, but under the current situation, this is unlikely to happen,” Korea Capital Market Institute economist Hwang Seiwoon said.
Recently, concerns resurfaced over the likelihood of a second wave of infections after a man tested positive for COVID-19 early May after visiting a number of nightclubs in Itaewon, Seoul. The nation’s health authority believes more than 200 of the new virus cases that have been confirmed since are connected to the man.
But the number is on a steep decline, so market insiders believe the incident is not worrisome enough to cause another KOSPI collapse.
One external risk factor that may determine the future of the stock market is a reviving fear of trade disputes between the United States and China, according to Hwang.
“The KOSPI is expected to fluctuate in line with how seriously the renewed trade dispute between the world’s two largest economic powerhouses unfolds,” he said. “But as of now, the risk factor does not come as a serious burden to the local stock market.”
Meritz Securities economist Kang Bong-joo said the main bourse may not be able to continue its upward momentum in case the nation’s GDP growth in the second half of the year falls far below market expectations. “The recent rise in the stock index was partly attributable to expectations that the local economy will be able to recover in the aftermath of the virus panic,” he said. “But if the economy continues to remain in the doldrums or even gets worse, the stock index will likely drop to some extent.”