KOSPI bounces back from coronavirus fears

Dealers at Hana Bank in Seoul, Friday, when the benchmark KOSPI closed at 2211.95 points. Yonhap

By Lee Min-hyung

The nation's major stock market is showing signs of bouncing back from the recent coronavirus fallout amid abating fears of the disease, analysts said Sunday.

According to the Korea Exchange, the benchmark KOSPI closed at 2211.95 points, up 4.38 percent ― or 92.94 points ― on Friday, compared to a week ago. The secondary bourse, the Kosdaq, jumped 7.7 percent to close at 672.63 points.

The signal for the KOSPI rebound will continue for now, as uncertainties surrounding the respiratory virus are on track for rapid decline, according to market experts.

“The Korean stock market will gain upward momentum in consideration that stock market players ― driven by the semiconductor sector ― are projected to increase their profits by a huge margin, and the number of people confirmed to have been infected with the virus remains at a low level here,” Eugene Investment & Securities analyst Kim Dong-wan said.

He also said the Chinese stock market is on a slow track to recovery amid expectations that the Chinese government will soon announce powerful measures to stop its economy from falling further victim to the spread of the virus.

Data compiled by the securities firm and Bloomberg also showed the Korean stock market was hit harder by the virus outbreak than other Asian economic powerhouses such as Japan and Singapore.

“Concerns over the virus have been too excessively reflected on the Korean stock market, so our view is that the KOSPI will stop its downward momentum,” Kim said. “Foreign investors already remain neutral over the local stock market's rebound and some of them even bet on its further growth.”

The economist picked chips and IT hardware as two of the most promising sectors that will achieve rapid recovery in their stock valuation when virus-related issues end.

Until recently, shares of Samsung Electronics, the world's leading memory chip maker, have been rising amid hopes for improvement in the market. More investors have been on a buying spree of company stocks due to the rosy market outlook while the firm's fundamentals remain strong enough.

But the company's shares recently tumbled in the face of virus fears.

Park Sang-hyun, an analyst at HI Investment & Securities, believes the local stock market will continue to be free from any concerns surrounding the virus, reflecting a slowdown in the disease's spread in Wuhan, the epicenter of the outbreak. He said this will provide a sense of relief to Korean stock markets.

“Also, the U.S. economy and stock market have returned to a track for rebound, which is a good signal helping the Korean stock market get away from virus fears,” Park said.

As of Friday, the Dow Jones Industrial Average was up 3 percent compared to a week ago. Other major indices, such as the S&P 500 and the tech-heavy Nasdaq, also reported growth during the period amid declining concerns over the epidemic.

But worries remain over a potential risk that the coronavirus could become a pandemic in the worst-case scenario, Park said.

“We still need to keep close tabs on any new reported cases of the virus in mainland China, as a growing number of people, particularly in Asia, are confirmed to be infected with the virus,” he said.

For this reason, potential risks remain over the declaration of a pandemic, Park said.

NH Securities & Investment, a Seoul-based securities company, predicted the KOSPI to trade in a band between 2,190 and 2,260 points Feb. 10 to 14.