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Despite a 2.28 trillion won selling bomb by foreigners, it closed down 0.04% at 6,715
"As long-term bond interest rate upward pressure eases, KOSPI's upper resistance may also weaken"
"The higher interest rates go, the more advantageous it will be for semiconductors and energy, which have high pricing power"
Although the U.S. raised its benchmark interest rate for the first time in 3 years and 2 months, embarking on monetary tightening, the South Korean stock market showed relatively solid performance, closing slightly lower on the 17th, garnering praise for holding up well.
Despite Federal Reserve (Fed) Chairman Kevin Warsh's somewhat 'hawkish' (monetary tightening preference) remarks, there are assessments that related concerns were either already priced in or uncertainty has actually eased.
According to the Korea Exchange and financial information service provider Yonhap Infomax, the KOSPI closed down 0.04% from the previous trading day at 6,715.41.
The index, which started up 0.91% at 6,779.02, briefly rose to 6,795.53 (+1.15%) immediately after opening.
The KOSDAQ closed up 0.76% from the previous trading day at 822.18.
In the KOSPI market, foreigners alone net-sold 2.2803 trillion won. In contrast, individuals and institutions net-bought 413.7 billion won and 158.7 billion won, respectively, while other corporations, which have recently emerged as major supply-demand players due to large-scale share buybacks by Samsung Electronics [005930] and SK Hynix [000660], recorded a net buying of 1.7045 trillion won.
Samsung Electronics and SK Hynix, the 'two leaders' of the domestic stock market, closed regular trading down 0.39% and 0.80% respectively, at 252,500 won and 1,745,000 won.
Major Asian stock markets showed a similar atmosphere.
Japan's Nikkei 255 index closed up 0.33% at 64,136.25, and Taiwan's Taiex index closed up 0.96% at 46,288.00.
However, as of 3:48 PM KST, China's Shanghai Composite Index is down 0.39%, the Shenzhen Composite Index is down 0.09%, and Hong Kong's Hang Seng Index is also showing a decline of -0.57%.
Overnight, the Fed raised its benchmark interest rate by 25bp (1bp=0.01% point) to 3.75-4.00% at the September Federal Open Market Committee (FOMC) meeting.
The accompanying statement was clearly revised in a hawkish direction, according to evaluations. Lee Kyung-min, a researcher at Daishin Securities, pointed out, "The phrase attributing inflation to 'supply shocks' was removed, and the phrase 'robust domestic spending' was added. A sentence connecting this rate hike to 'a sooner return' to the 2% inflation target was also added."
However, he assessed that "considering that the market had already priced in a 93.5% probability of a 25bp rate hike based on the CME FedWatch just before the September FOMC, it was not a market shock variable."
Although bond yields soared and the decline in the New York stock market widened due to Chairman Warsh's hawkish press conference, it is noteworthy that there was an attempt to rebound towards the end of the session.
The researcher said, "This suggests that confidence in monetary policy and price stability has been restored through this rate hike, and I believe it is a change resulting from the market having already priced in hawkish rate hike concerns by treating rate hikes as a fait accompli."
In fact, according to CME FedWatch, the federal funds rate (FFR) futures market had reflected the possibility of the Fed raising interest rates four times between September this year and June next year, as of last weekend (12th).
However, the researcher stated that expectations have now shifted to only three rate hikes: in September this year, and in January and April next year.
The researcher predicted that as long-term bond interest rate upward pressure gradually eases in the future, the KOSPI's upper resistance in the 7,000-7,100 range is highly likely to weaken.
There is also an interpretation that the hawkish stance shown by Fed officials, including Chairman Warsh, actually means that the U.S. economy is robust.
Heo Jae-hwan, a researcher at Eugene Investment & Securities, pointed out, "Chairman Warsh said in a press conference that 'we have only removed some of the accommodation, and it is difficult to describe current financial conditions as restrictive.' This leaves room for further rate hikes," while adding, "Conversely, it means they are optimistic about the U.S. economy."
In fact, the growth rate forecast for this year was raised from 2.2% in June to 2.3%, and the core PCE inflation forecast was also raised from 3.3% in June to 3.4%. Heo analyzed that "raising both inflation and growth rate simultaneously reflects a higher risk of the economy overheating rather than a supply shock from rising oil prices."
Heo predicted, "If oil prices remain stable, the burden on the economy and corporate earnings is likely not significant. Instead, companies with lower pricing power will likely fall out of the stock rally as interest rates rise," adding, "Sectors that can immediately pass on price increases, such as semiconductors/energy, are expected to benefit."
While interest rate hikes are a burden on short-term bond yields, there is also an analysis that the Fed's commitment to price stability will serve as a factor limiting further increases in recently soaring long-term bond yields.
Gong Dong-rak, a researcher at Daishin Securities, analyzed that "full-fledged curve flattening will become a sign of stability and will actually quell market anxieties."
Kim Myung-sil, a researcher at iM Securities, also stated, "The Fed's clear demonstration of its will to curb inflation is a positive factor that will suppress extreme further increases in 10-year bond yields," and predicted that a runaway surge in long-term interest rates would be limited under a hawkish rate hike stance.
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