Is it a KOSPI year-end rally written in a new story or a bubble correction?



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After breaking the record in terms of closing price, the KOSPI also broke the record for the week. Two days in a row, the KOSPI broke the record for all-time highs.

▲ The stage of the trading room at KEB Hana Bank in Jung-gu, Seoul, on the afternoon of the 24th, when the KOSPI renewed its record at 2,617.76. The won-dollar exchange rate rose 2.3 won to 1,112.7 won. [뉴시스]

On the 24th, the KOSPI index closed at 2,617.76, an increase of 15.17 points (0.58%) compared to the previous day. It exceeded 2607.10, the previous intraday high price recorded on January 29, 2018. The day before, the KOSPI closed at 2602.59, breaking the previous record of 2598.19, set on January 29, 2018 based on the closing price. , in two years and 10 months, setting a new record.

Foreigners led the way when I went alone to the ‘lion’. By business entity, individuals and institutions sold 24.6 billion won and 6.924 billion won, respectively, while foreigners bought 7.264 billion won. Among the top stocks by market capitalization, LG Chem increased by 6%, while Samsung SDI, Samsung C&T, Kakao, Hyundai Motor, Kia Motors and POSCO showed strong performance.

The stock market is assessed to be rapidly reflecting the expectation of an economic recovery, but the speed is faster than expected, and controversy over whether it is an appropriate share price or ‘bubble’ is also increasing. Kim Yong-beom, First Deputy Minister of the Ministry of Strategy and Finance, warned at the macroeconomic finance conference held at the KDB Development Bank headquarters in Yeouido that day, “The share prices of major countries are rising sharply, but we must beware of excessive optimism until the real economy recovers. “

However, some are of the opinion that the current share price does not deviate much from fundamentals. Young-hwan Kim, a researcher at NH Investment & Securities, predicted that “a period is still necessary to extend the rise again” and “the end-of-year KOSPI is likely to remain around 2,500-2600 points.” Researcher Kim predicted that the KOSPI could have room for a further increase to 2,690.

▲ [NH투자증권 제공]

Rapid recovery in growth rate, low interest rate, weak dollar ‘three beats’

The biggest driving force behind the share price is foreign buying. The main reason for this is the trend of the forex market leading to a weak dollar. Another important background is the increased preference for risky assets due to the resolution of uncertainties related to the US presidential elections and the visualization of the development of the Corona 19 vaccine.

Pyeon Deuk-hyun, a researcher at NH Investment & Securities, said: “If the won is strong, foreigners will benefit only from currency gains, even if the share price is flat.” On this day, the won-dollar exchange rate ended at 1,112.7 won, an increase of 2.3 won from the previous day, but it is still in the 1,100 won range. Samsung Securities forecasts KRW 1050 and KRW 1010, respectively, for the won-dollar exchange rate in late 2021 and 2022, as the dollar continues to weaken for a long time.

The US Federal Reserve System (Fed, Fed) is in a position to maintain a low interest rate trend until 2023. It is analyzed that even if the economy recovers and inflation expectations increase in the future, the rise in interest rates will be limited. Samsung Securities said: “This means that the low discount rate of stocks will be maintained for a period of time. Under these conditions, stocks will be preferred to bonds next year.”

Expectations of economic recovery also influence. With Corona 19, this year’s world real gross domestic product (GDP) growth rate is expected to register -3.8% year-on-year. This is not only well below the -0.1% of the global financial crisis in 2009, but also the worst since -5.8% in 1946, the year after the end of World War II.

However, next year he is expected to recover quickly. According to the macro team at Samsung Securities, the global economy is expected to grow 5.8% next year. It is the highest level since the mid-1970s. By country, it is analyzed that the US will achieve a high growth rate of 4.8%, China 8.1% and Korea 3.5%. Samsung Securities predicts that the KOSPI will rise to 2,850 next year.

Researcher Kim said: “It seems desirable to have a strategy that contains the beneficiaries of the economic recovery, which has been relatively lower than the KOSPI for the last three years, while the industry valuation has been lower than the KOSPI.” . We consider that the transportation industry was positive in terms of contact consumption, with clothing stores and duty free.

▲ Distributors at the Yeouido main branch of KB Kookmin Bank are closely watching the market situation. [KB국민은행 제공]

Key variables for interest rate fluctuations … Protective trade barriers are also an obstacle

On the contrary, it is also possible that the stock market undergoes a considerable correction. Two scenarios are envisaged: the first is a case where the focus is quick not only in the stock market but also in the bond market. In other words, this is a case where bond yields rise, increasing the valuation burden on the stock market. According to NH Investment & Securities analysis, a 0.30% p increase in government debt yields could cause the equity price index to fall below 2,500.

Second, as the global spread of the crown19 shocks the economy again, the earnings outlook for next year is undermined and, furthermore, the government’s initial policy response is not properly implemented. It is noted that to prepare for such downside risk in the stock market, it is necessary to monitor ‘if long-term government bond rates rise’ and ‘if economic indicators deteriorate in the main regions of the corona spread19 , like the United States. ‘

“Even if the growth rate recovery continues, it is still difficult to estimate the growth path from the pre-Corona 19 situation,” said Cho Byeong-hyun, researcher at Yuanta Securities. “The direction of interest rates in the stock market next year will be a very important variable.” .

The barrier to protected trade, which has already advanced considerably, is also an obstacle. In the process of trade disputes between the US and China, there have been cases where the US has sanctioned Chinese companies and entrepreneurs on the basis of minority human rights issues in China and Hong Kong, and the US. The US and the European Union (EU) have standardized environmental and human rights issues for their trading partners. There is also an ongoing movement to introduce measures that force a meeting.

UPI News / Reporter Park Il-kyung [email protected]

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