[Good Morning Stock Market] Will the Base Interest Rate Increase?

Slight Rise Ahead of Fed Speech in US Markets the Day Before
Impact of Bank of Korea's Decision on South Korean Stock Market on the Day

[Asia Economy Reporter Junho Hwang] One of the biggest events shaping this week's stock market is the Bank of Korea's Monetary Policy Committee meeting, which will be held on the 26th. The Korean stock market is expected to show different trends depending on the outcome of the Monetary Policy Committee. On the 25th (local time), the New York stock market closed slightly higher ahead of Federal Reserve Chair Jerome Powell's speech at the Jackson Hole Symposium on the 27th.

Sangyoung Seo, a researcher at Mirae Asset Securities, said, "The key focus is the base interest rate decision at the Monetary Policy Committee and Governor Lee Ju-yeol's press conference," adding, "The market's behavior will vary depending on the scenario."

If the interest rate is raised and Governor Lee makes dovish remarks, the market impact may not be significant, as this issue has already been priced in. The same applies if the base rate is held steady and hawkish remarks are made.

On the other hand, if the interest rate is raised and hawkish remarks continue, it will be interpreted as a signal for further rate hikes, which will burden the market. Also, if the rate is held steady and dovish remarks are made, concerns about economic slowdown are expected to increase.

Researcher Seo predicted, "The market is expected to start with a rise of around 0.3% on the day, but it will show changes while closely watching the Monetary Policy Committee's results."

[Image source=Yonhap News]

The US stock market showed a slight upward trend the previous day. On the 25th (local time), the Dow Jones Industrial Average rose 39.24 points (0.11%) to close at 35,405.50, the S&P 500 increased 9.96 points (0.22%) to 4,496.19, and the Nasdaq rose 22.06 points (0.15%) to 15,041.86.

Ahead of Chair Jerome Powell's speech the next day, US Treasury yields showed an upward trend. The 10-year Treasury yield rose by 0.05 percentage points to 1.349%, the highest level since early this month. The 5-year Treasury auction yield also rose significantly to 0.831%, compared to 0.71% the previous month.

Jiyoung Han, a researcher at Kiwoom Securities, said, "The Korean stock market is expected to show limited price movements due to cautious sentiment surrounding the Jackson Hole meeting and generally sluggish trading," adding, "Following the previous trading day, a wait-and-see market with trading battles in a flat phase is likely to unfold, but differentiated price movements by sector are expected."

He further noted, "The Philadelphia Semiconductor Index (+0.8%) showed strength due to news of Western Digital's acquisition of Kioxia and TSMC's semiconductor price hikes (+10~20%), including M&A and price increase news, which is expected to improve investor sentiment in domestic semiconductor value chain sectors."