Impact of Base Rate Hike... KOSDAQ Also Turns to Decline

Lee Chang-yong, the nominee for Governor of the Bank of Korea, is arriving at the confirmation hearing office set up in the Booyoung Taepyeong Building on Sejong-daero, Jung-gu, Seoul, on the 1st, and responding to questions from the press. Photo by Joint Press Corps

[Asia Economy Reporter Hwang Junho] On the 14th, the stock market turned to a downward trend following the Bank of Korea's base interest rate hike.

On that day, both the KOSPI and KOSDAQ started with gains. However, as the likelihood of the Bank of Korea's Monetary Policy Committee raising the base interest rate increased, the KOSPI turned to a decline. Subsequently, when the Monetary Policy Committee announced a 25 basis point increase in the base rate to 1.50%, the KOSDAQ also turned red.

Currently, the KOSPI is barely maintaining the 2700 level. As of 10:08 AM, the KOSPI is at 2704.09, down 0.46% from the previous session, while the KOSDAQ is at 925.79, down 0.16%. Both KOSPI and KOSDAQ are experiencing net selling by foreigners and institutions, with individuals buying 184.1 billion KRW and 82.9 billion KRW respectively, struggling to support the indices. Although the base interest rate has risen, the financial sector recorded a slight decline of 0.04%. By stock, Shinhan Financial Group rose 1.11%, whereas KakaoBank fell 0.8%.

In particular, due to it being the options expiration day, market volatility is expected to increase further in the afternoon. Seo Sang-young, a researcher at Mirae Asset Securities, stated, "The base interest rate hike is a factor that expands intraday volatility," adding, "There is also the burden that volatility at the closing price may increase due to position liquidations centered on financial investments, as the issue of futures overvaluation may emerge after the options expiration day."