Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Coronavirus lays bare Korean market's poor resilience
Dealers at Hana Bank in central Seoul look into monitors as the stock market fluctuates, Monday. / Yonhap
By Anna J. Park
Chinese stock markets cushion blow from virus better than KOSPI
By Anna J. Park
The rapid spread of the coronavirus has laid bare the weakness of the Korean stock market, suggesting that it is less resilient than other markets in Asia ― including China, the origin of the virus.
As the number of confirmed cases of COVID-19 in Korea continues to increase, the nation's benchmark KOSPI has suffered wilder fluctuations falling below the psychologically-important 2,100 level. In just over a month, from Jan. 23 to Feb. 26, the index dropped by nearly 7 percent.
However, the stock market in China is demonstrating a more stable and solid performance than the KOSPI market.
China's benchmark Shanghai composite index closed at 3,013.05 Tuesday, down 0.6 percent from the previous close. The Chinese market also dropped sharply upon its reopening after the Lunar New Year's Holiday ― during which time the epidemic spread had worsened ― however the drastic plunge has now almost recovered.
From Jan. 23 to Feb. 25 the index rose by 1.22 percent from 2,976.53 to 3,013.05. When compared to figures at the very beginning of the year, the China market saw an overall a decline of 2.3 percent, compared to the KOSPI market's 3.2 percent drop during the same period.
China's other SZSE Component Index, compiled by the Shenzhen Stock Exchange, showed an even better performance. From Jan. 23 to Feb. 25, the index saw a 10.9 percent jump ― a complete rebound from the early February plunge due to the spread of the coronavirus. Compared to the beginning of this year, the index had risen by 11.4 percent.
Market watchers say the Chinese government's strong pump-priming efforts to stimulate the economy had buttressed the market.
“In an effort to support the economy hit hard by the deadly virus, the People's Bank of China decided to supply massive liquidity worth 1.2 trillion yuan earlier this month, by cutting crucial interest rates, including the one-year medium-term lending facility rate (MLF) to 3.15 percent from 3.25 percent, and the one-year loan primate rate (LPR) to 4.05 percent from 4.15 percent,” Shin Seung-woong, analyst at Yuanta Securities Korea, said.
The analyst added that the lessons learned during previous pandemic cases such as SARS, as well as the slowed growth of newly-confirmed coronavirus cases, have also helped the Chinese market to rebound quickly.
Seo Sang-young, analyst at Kiwoom Securities, stressed that the Chinese businesses' sturdy corporate profits are another pillar of the Chinese stock market's sound performance. The analyst pointed out that Korean enterprises' sluggish earnings are one of the key reasons the KOSPI market has stalled.
“China and Korea are very disparate in their markets. We are heavily export-oriented and easily impaired by exterior uncertainty. However, China has very strong domestic market, although it relies much on exports, as well,” Seo said.
In addition, Seo pointed out that the Chinese government swiftly announced a set of stimulus packages upon the economic plunge, adding that domestic stimulus measures seem necessary to boost the market.
“However, what is essential is that the level of corporate profits has not yet much improved. Chinese companies, meanwhile, post considerably handsome profits, which ultimately determine the value of stocks,” Seo said.