"US Tightening Policy Still Ongoing"... KOSPI Decline Narrows, KOSDAQ Recovers Above 1000

[Asia Economy Reporter Ji Yeon-jin] On the 17th, the KOSPI index reduced its losses in the afternoon, escaping the impact of the early rate hike mention by the U.S. Federal Open Market Committee (FOMC). The KOSDAQ index succeeded in rebounding during the session and recovered the 1000-point level.

As of 1:43 PM, the KOSPI index was at 3,264.71, down 13.97 points (0.43%) from the previous day. The index started trading at 3,276.20, down 2.48 points (-0.08%) from the previous day, then widened its losses to fall to 3,251. However, the loss narrowed as individual investors expanded their buying, net purchasing about 860.3 billion KRW. Foreigners and institutions net sold about 369.3 billion KRW and 497.2 billion KRW, respectively.

Among the top market capitalization stocks, only Kakao (+2.45%) and LG Chem (+3.09%) showed strength. Kakao rose to 149,500 KRW, hitting a 52-week high again and reclaiming the third place in market capitalization. LG Chem showed strength following news that its subsidiary LG Energy Solution will supply batteries to a U.S. power company. However, Samsung Electronics fell 1.10%, breaking below 8,100 KRW, and SK Hynix dropped 1.93%. Naver (0.51%), Samsung Biologics (-0.11%), and Samsung SDI (-0.15%) showed slight declines.

The narrowing of losses is interpreted as investors easing concerns about tightening, as the FOMC meeting results allowed them to gauge the timing of the Fed's rate hikes and tapering. Lee Kyung-min, a researcher at Daishin Securities, said, "(This FOMC result) suggests it is difficult to see the Fed's monetary policy stance as having shifted to tightening," adding, "The current monetary policy is maintained, and the tapering, which can gauge the pace of the Fed's monetary policy normalization, remains within the cautious discussion and possibility exploration stage without significant deviation."

At the same time, the KOSDAQ index was trading at 1,002.89, up 4.40 points (0.44%) from the previous day. While individuals net sold about 76 billion KRW, foreigners and institutions net bought about 88.6 billion KRW and 3.8 billion KRW, respectively.

The top three KOSDAQ market cap stocks?Celltrion Healthcare (0.17%), Celltrion Pharm (1.35%), and EcoPro BM (4.06%)?all showed gains, while Pearl Abyss (-1.25%) and Kakao Games (-1.94%) declined.

Lee Jin-woo, head of investment strategy at Meritz Securities, said, "The rate hike timing being brought forward by six months is interpreted as a breather centered on large-cap KOSPI stocks," adding, "

The KOSDAQ has been less affected than the KOSPI because it has risen less so far, and since the tightening perception is more about the rate hike being anticipated but brought forward, a slight adjustment is expected."

Seo Sang-young said, "The Fed's significant upward revision of inflation forecasts and adjustment of the rate hike timing is a burden and could negatively affect emerging market stocks," adding, "The Korean stock market, after hitting an all-time high the previous day, is likely to see profit-taking sales, but losses will be limited mainly to stocks with high expectations for earnings improvement."