Volatility in store for Kospi with spikes in Covid cases

Stock market volatility is likely to return this week as the nation struggles to contain spikes of the coronavirus in the greater capital area, analysts said Sunday.

The benchmark Kospi closed at 2,304.59 points on Friday, down 4.27 percent from 2,407.49 a week ago.

The index remained choppy last week, as daily new cases of Covid-19 flared.

Analysts said the virus scare is likely to trigger a downward adjustment this week.

"Investor sentiment has weakened considerably since the government raised the social distancing level to Level 2," said Moon Nam-joong, a global strategist at Daishin Securities. "Despite the favorable environment in financial markets, the local stock market is under strong downward pressure."

Analysts expected that the fifth U.S. stimulus package, which could boost stock prices, would need more time before lawmakers reach an agreement.

"The local stock market is prone to [downward] adjustment, unless the U.S. Fed signals additional stimulus measures, or the U.S. show progress in the stimulus talks," NH Investment & Securities analyst Noh Dong-kil said.

The political frictions between the United States and China, South Korea's two largest trade partners, also remain a risk, he said.
A Bank of Korea monetary policy meeting is set for Thursday. The central bank is widely expected to keep the interest rate at the current 0.50 percent.

Yonhap