'Expecting Price Stability with Giant Step'... KOSPI and KOSDAQ Successfully Rebound

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 16th, the domestic stock market started higher. As the panic selling subsided, the market showed signs of recovering the previous day's losses. The New York stock market interpreted the unprecedented interest rate hike in 28 years as a factor that could curb inflation, leading to a relief rally, and the domestic market also showed movements to view this as an opportunity for price stability recovery.

On this day, the KOSPI opened at 2,481.66, up 34.28 points (1.40%), and the KOSDAQ opened at 812.95, up 13.54 points (1.69%). As of 9:12 a.m., the KOSPI was at 2,486.90 and the KOSDAQ at 816.51.

The U.S. New York stock market on the 15th (local time) closed higher despite the Federal Reserve's 'Giant Step' (a 0.75 percentage point interest rate hike), leading to a relief rally. The Dow Jones Industrial Average closed at 30,668.53, up 303.70 points (1.00%) from the previous session. The Standard & Poor's (S&P) 500 index rose 54.51 points (1.46%) to 3,789.99, and the tech-heavy Nasdaq index surged 270.81 points (2.50%) to close at 11,099.15.

Recently, the New York stock market, which had plunged due to news that U.S. inflation had worsened, rallied after the Federal Open Market Committee (FOMC) of the Fed raised the benchmark interest rate by 0.75 percentage points as expected at the June meeting that ended that day. The market seemed relieved by the expectation that the measure would help curb inflation, which hinders economic growth, and aid in restoring price stability.

In the early session, individuals are buying, but foreigners and institutions are net sellers. Individuals are buying 42 billion KRW and 19.2 billion KRW in the KOSPI and KOSDAQ markets, respectively. On the other hand, foreigners have been selling for 10 consecutive trading days, with net sales of about 19.4 billion KRW and 10.9 billion KRW in the two markets, respectively. Institutions are also selling 20.2 billion KRW and 4.1 billion KRW in the two markets, respectively.

Among the top market capitalization stocks in the KOSPI, most, including Samsung Electronics, LG Energy Solution, SK Hynix, and Samsung Biologics, are rising. The top market capitalization stocks in the KOSDAQ, such as EcoPro BM, Celltrion Healthcare, L&F, and Kakao Games, are also on the rise.

Seo Sang-young, head of the Media Content Division at Mirae Asset Securities, said, "The fact that the U.S. stock market rose despite a 75bp rate hike is positive for the Korean stock market," adding, "Since the foreign selling was large compared to other countries the previous day, a rebound inflow can occur, and the Korean stock market is expected to start with a rise of around 1% and find stability."

Han Ji-young, a researcher at Kiwoom Securities, said, "After the panic selling that led to a new yearly low in the domestic stock market the previous trading day, the market is expected to rebound today, supported by the fading impact of the Fed's June Giant Step and the sharp drop in the won/dollar exchange rate (currently down more than 10 won offshore)," adding, "However, the direction of oil prices, which most significantly affect future expected inflation, has become important, and the market will need to digest the June consumer price index scheduled for July (expected to confirm a peak-out) and the July FOMC event (expected 75bp hike) before a full relief rally unfolds."