| Workers in protective suits spray disinfectants at a traditional market in southern Seoul, Wednesday. Yonhap |
'Stock performance to mimic MERS instead of SARS'
By Kim Bo-eun
The escalating coronavirus crisis in Korea could reach a peak March 20 with as many as 10,000 infections, according to J.P. Morgan Chase.
"Korea's COVID-19 infection rate has not reached its peak. Assuming a 3 percent initial exposed group out of 2.4 million people in Daegu and a secondary infection rate based on China's virus curve, given the early stage of the spread, the peak of the cycle could be March 20, with a peak infection of 10,000 people," the investment bank said in a report released Monday.
The forecast comes as the number of confirmed cases of coronavirus infections rose to over 1,000 with 12 deaths.
The virus had been mostly contained for a month following its outbreak here Jan. 20. But the number of confirmed cases jumped in the past week after cluster infections occurred as a result of mass gatherings of a religious cult known as the Shincheonji Church in the southeastern city of Daegu.
The report said the unfolding coronavirus epidemic would deal a substantial blow to the economy.
J.P. Morgan earlier forecast that COVID-19 would lead to a 1 percent contraction in Korea's GDP in the first quarter, quarter-on-quarter. Furthermore, it cut its forecast for Korea's annual GDP growth to 2 percent from 2.3 percent.
"However, given the sudden and substantial increase in infections, we see further downside risks to GDP growth," the report said.
The investment bank also expects that the performance of local stocks will mimic the situation seen at the time of the Middle East Respiratory Syndrome (MERS) outbreak in May 2015.
The report noted that in the case of the Severe Acute Respiratory Syndrome (SARS) outbreak in February 2003, the local market recovered quickly, as the virus was successfully contained.
"However, the market took much longer to recover from MERS, as Korea became the country with the second most reported cases. We believe the Korean market will likely mimic the MERS period and see further volatility until there is a clear sign of virus eradication."
J.P. Morgan expected escalating COVID-19 issues would negatively impact the entire domestic market, given potential disruptions in supply chains, domestic consumption, exports and overseas tourists.
The report said banks, casinos, consumer goods, automobile, petrochemical and tech businesses could be negatively impacted, while food and beverage, gaming, internet and telecom companies were likely to see a limited impact, given the increasing number of people remaining indoors.