Bank of Korea, Another Surprise Base Rate Cut... Which Stocks Benefit in the Market?

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] Following the Bank of Korea's sudden cut in the base interest rate, attention is focusing on which stocks will benefit in the future stock market. Experts expect demand to concentrate on securities stocks and dividend stocks.

According to the financial investment industry on the 28th, the Bank of Korea's Monetary Policy Committee (MPC) decided at the monetary policy direction meeting held that day to lower the interest rate by 0.25 percentage points from the existing annual 0.75% to 0.50%. On March 16, the Bank of Korea held an emergency MPC meeting to respond to the economic shock caused by the spread of the novel coronavirus infection (COVID-19) and lowered the base rate from 1.25% to 0.75%. The MPC maintained this rate on April 9 but decided on an additional cut on this day considering the economic situation.

In the securities industry, securities stocks and dividend stocks were cited as beneficiaries of this Bank of Korea interest rate cut decision. Securities companies holding a large number of bonds benefit from increased bond valuation gains when interest rates are lowered. An increase in brokerage revenue due to improved risk asset preference sentiment is also expected to play a part.

In fact, securities stocks are rising across the board on this day. According to the Korea Exchange, as of 10:12 a.m., Korea Financial Group, which has Korea Investment & Securities as a subsidiary, saw its stock price surge sharply by 4.89%. Hyundai Motor Securities rose 2.17%, Samsung Securities 1.39%, Daishin Securities 1.41%, Mirae Asset Daewoo 2.92%, and NH Investment & Securities 1.97%, all showing upward trends.

A financial investment industry official explained, "Due to the effect of the interest rate cut, dividend stocks are also classified as stocks with increased investment attractiveness as dividend yields relatively rise."