This article comes from WeChat public account: Wall Street News (ID: wallstreetcn) , author: Fang Ling

This is a nearly vertical upward, suffocating curve, a lifeline of the Korean economy.

Data source: Korean CDC

On February 26, the number of new cases of New Coronavirus outside China exceeded that in China for the first time. South Korea is the most worrying of several countries where cases are increasing at a rapid rate.

As of 4:00 pm on February 27, South Korea has added 505 new cases of confirmed new crown virus infection the previous day, and the total number of cases has reached 1,766. Prior to this, South Korea also surpassed Japan to become the country with the second largest number of confirmed new crown virus infections in the world.

With the spread of the epidemic, the South Korean government has raised the crisis warning level to the highest “severe” level and plans to adopt a “maximum blockade” against Daegu Qingbei, which has a large number of infected people.

At the same time, South Korea has begun to “hard to find.” According to the statistics office of Korea, the online single selling price of masks has recently exceeded 4,000 won, about 23 yuan, which is 6-8 times more than before the epidemic.

Picture: Some important events in the development of the Korean epidemic situation

Since the first case was confirmed on January 20, to “Patient No. 31”, Daegu has become the most infected city in South Korea by itself, and to the “explosive” growth of cases in the past week, Korean investors may Unexpectedly, what is needed most in 2020 is a strong heart.

JPMorgan Chase estimates on February 25 that the cumulative number of cases in South Korea this Sunday will reach 1993. (However, according to the current situation, do not wait until the week Day, tomorrow will break the 2000 mark) .

That’s over? of course not.

JPMorgan Chase’s model states that South Korea is still three and a half weeks away from the peak of the epidemic, that is to say, South Korea will usher in a peak of infection by the middle and late March, when the number of cases is expected to reach about 10,000.

The South Korean stock market that has been hit has not fallen to the end

With the increasing number of confirmed diagnoses and the continuous increase in the level of early warning, the Korean stock market has responded simultaneously.

Since the first case was confirmed in South Korea on January 20, the Seoul Composite Index experienced a wave of decline; the stock market rebounded in mid-February as the number of infections decreased.

But the turning point soon appeared. The diagnosis of “Patient No. 31” and the number of people infected on February 20 doubled within a day. The market responded quickly with a “big drop.”

It can be seen that since February 14, the Seoul Composite Index and the Kosdaq have experienced a new round of declines. As of February 27, the Seoul Composite Index has fallen by nearly 8%.

JP Morgan pointed out that stock markets tend to go down during the outbreak. The correction rates of the KOSPI for the Seoul Composite Index in South Korea during the SARS and MERS periods were -16% and -14%, respectively, which are larger than the current declines during the new crown virus period.

However, given the rapid rise in cases in South Korea, the stock market is expected to usher in greater adjustments.

Image source: JPMorgan Chase

The article states that the market’s response also depends on government control of the virus. Judging from the current situation, the performance of the Korean market may be closer to the MERS period than to SARS.

Because the virus is not well controlled in South Korea, it takes much longer for the market to recover from MERS despite lower mortality rates.

Downside risks have greatly increased and GDP may shrink in the first quarter

Before the surge in domestic cases in South Korea, the South Korean economy has felt pressure, not only the tourism industry has been hit hard, but the automobile manufacturing industry, which is closely connected to China’s supply chain, has also suffered.Suffered huge losses.

As the severity of the local epidemic continues to increase, the direct impact on the Korean economy is also growing.

On February 27th, although the Bank of Korea unexpectedly kept the main interest rate unchanged, it lowered its growth forecast for this year to 2.1%, which was previously 2.3%. In addition, the Governor of the Bank of Korea, Lee Joo Yeol, also pointed out that South Korea ’s GDP may contract in the first quarter.

A similar view was given by investment banks.

The latest opinion of JP Morgan Chase ’s Korean Economic Team on February 24th believes that due to the epidemic, South Korea fell by 1% QoQ in the first quarter of this year. ) , the annual GDP growth rate is expected to be reduced from 2.3% to 2.2%.

It is worth noting that given the sudden and substantial increase in confirmed cases, the Korean economy will face further downside risks.

Can the global supply chain be hurt a bit more?

What’s more worrying about the world is that as a major trading country and an important part of the global supply chain, if the epidemic goes further out of control, the possibility of South Korea’s taking industrial shutdown measures will gradually increase.

Statistics show that South Korea ’s exports are equivalent to 44% of its GDP, which is second only to Germany in the major advanced economies.

As a major manufacturing country after China, the United States, Japan, and Germany, CICC said that the direct impact of South Korea ’s epidemic may exacerbate the strain on the global manufacturing supply chain, especially in its advantageous industries such as electronics, steel, and automobiles.

OECD data show that the global added value of South Korean manufacturing industry accounted for 3.1% in 2015, of which the global added value of electronic products accounted for 7.7%.

In 2015, South Korea supplied 4.3% of the manufacturing upstream intermediate products to the world. Among them, 10.2% of the global electronics industry’s intermediate products come from South Korea.

Although the South Korean supply chain has suffered a lot from the shutdown of Chinese factories before, it is a little comforting that JP Morgan believes that the impact of the epidemic on electronics manufacturers such as Samsung Electronics and SK Hynix is ​​relatively mild. .

Take Samsung Electronics as an example, an employee of Gumi branch was diagnosed on February 22, and the factory was closed in the morning from February 22 to February 24.

It is reported that the factory is responsible for the production of high-end smart phones. The just-launched folding phone Galaxy Z Flip is produced at the factory, but the factory only contains a small part of the production of mobile phones.

SK hynix also adopted home isolation measures for more than 800 employees in Icheon Branch on the 20th because of new employees coming into contact with confirmed cases in Daegu and pneumonia in another employee.

Analysis believes that all production of SK Hynix is ​​automated in a clean environment, and there is little chance of contamination.

LG Electronics closed the Incheon R & D center where the employee worked on February 24 because the employee’s family was diagnosed. JPMorgan said the incident would not have a direct impact on earnings, given that the plant is still operating normally.

In addition, Samsung SDI, Samsung Electric (SEMCO) , LG Innotek, a manufacturer of electronic parts and components owned by LG, currently has no factories in Korea. shut down.

Image source: JPMorgan Chase

This article comes from WeChat public account: Wall Street Seeing (ID: wallstreetcn) , author: Fang Ling