[주간증시전망] Let’s shift our eyes from the US to China

Input 2021.02.28 08:00

Amid growing volatility in the domestic stock market, it is expected that this week (2nd-5th), the annual largest political event held in China, Yanghoe, will be a big variable. Both meetings are abbreviated terms for the annual meetings of the National People’s Congress (NNP), which is the national decision-making body in China, and the Chinese People’s Political Consultation Council (Political Association), which is an advisory body.

Last week (22-26), the KOSPI index closed at 3012.95, down 3.05% from the 19th (3107.62), the last trading day of the previous week. The index declined for three consecutive trading days from the 22nd as concerns about a rate hike arising from the rise in US Treasury yields arose. In particular, on the 24th, it collapsed below the 3000 line for the first time since the 29th of last month.

◇ Markets anxious to recover liquidity in China

This week’s financial market interest is focused on both sides of China. In particular, the need to pay attention to the debt-related policy announced by the Chinese government at both meetings was raised. As debt increased due to economic stimulus measures implemented to respond to the novel coronavirus infection (Corona 19), it was predicted that the government would sooner or later come up with countermeasures.

Hong Kong’s South China Morning Post (SCMP) said on the 25th that there is a possibility to reduce economic stimulus measures in both meetings as China is facing a situation where it will have to set a long-term goal by 2035. At this time, it was expected to reduce the fiscal deficit, issuance of local special bonds for infrastructure construction, and increase the budget for public welfare.

Seo Sang-young Kiwoom Securities (039490)“When Prime Minister Li Keqiang gives the opening speech at NPC University, attention is usually drawn to the economic growth rate, but this time the market will move on issues related to the debt ratio and liquidity.” “It can lead to a sale.”

In fact, the KOSPI index, which has remained in the box zone since last month, is increasing volatility as net purchases by foreigners are linked to the supply of liquidity at the People’s Bank. The background of the plunge in the index on the 24th was a concern about changes in policy stance arising from the successive absorption of liquidity by the People’s Bank and an increase in the stock exchange tax in Hong Kong.

Some argued that the People’s Bank’s liquidity recovery would increase volatility in the stock market for the time being, but it would not pose a big threat to dampen the uptrend. Some analysts say that the impact of the two sessions on the stock market will be less than in the past.

Ahn So-eun, a researcher at IBK Investment & Securities, said, “The People’s Bank is formulating that it is not an austerity transition, but the market boundary is inevitable because the recovery of funds is visually confirmed,” and “China’s stimulus measures are weaker than during the global financial crisis. And given that the economy has not overheated enough to require aggressive tightening, the direction of stimulating the economy itself will not change.”

Kim Kyung-hwan, researcher at Hana Financial Investment, said, “The head of the Communist Party has already declared a gradual exit strategy and reinforced risk management through an economic work meeting last month. It has always served as an inflection point for market conditions and style changes.”

◇ Concerns about rising interest rates are limited

Stock market anxiety arising from rising US Treasury yields is expected to gradually ease. This is because the economy has not fully recovered enough to lead to an interest rate hike, which investors are concerned about, and the Federal Reserve System (Fed) has reaffirmed its position to maintain its existing policy trajectory.

On the 26th (local time) in the New York Stock Exchange, the Dow Jones 30 Industrial Average closed at 30932.37, down 469.64 points (1.5%) from the previous day. The Standard & Poor’s (S&P) 500 index fell 18.19 points (0.48%) to 3811.15, while the Nasdaq index rose 0.56%. The Dow Jones fell 1.8 percent over the past week, while the S&P 500 and Nasdaq fell 2.5 percent and 4.9 percent, respectively.

Nam-jung Moon, a researcher at Daeshin Securities, said, “The fundamentals are not strong enough to tighten austerity less than a year after the start of the corona crisis.” It has no choice but to give strength to the stance of easing monetary policy.” “With interest rates behind, the stock market will begin to rise,” he added.

Earlier on the 24th (local time), Fed Chairman Jerome Powell said at a hearing in the House of Commons, “it may take three years or more to reach the inflation target, which is one of the prerequisites for a monetary policy shift,” and once again drew a line on the possibility of a rate hike. The 10-year interest rate, which rose to 1.42% a year before Chairman Powell’s hearing, fell to the 1.38% level after his remark.

In-hwan Ha, a researcher at KB Securities, said, “If you consider the overall context and lineage of Chairman Powell’s answer, I believe that it has been enough to appease the market.” It can be interpreted as showing the willingness to intervene.”

On the other hand, most experts predict that the stock market can increase volatility for the time being because asset prices have soared. It is pointed out that the transaction value has decreased as the domestic stock market has recently hit a peak and continues to the box zone, and the volatility of cryptocurrencies including bitcoin can be a burden.

However, Yoo-jun Choi, a researcher at Shinhan Investment Corp. said, “After passing through the current volatility period, we will enter the market for earnings. Since the fundamentals themselves are steadily improving, the eyes will shift to corporate profit growth after some adjustments “He added.