[MarketING] Market Relieved by Yellen... KOSPI Recovers to 2400 Level

KOSPI Rises Two Consecutive Days to Recover 2400 Level
Impact of US Stock Market Increase Following Yellen's Remarks

On the 5th, KOSPI opened at 2,268.20, up 12.22 points (0.54%) from the previous trading day, as employees worked in the dealing room of Hana Bank in Jung-gu, Seoul. The won-dollar exchange rate started at 1,271.0 won, down 0.7 won from the previous trading day. Photo by Hyunmin Kim kimhyun81@

The KOSPI started higher, regaining the 2400 level. As the U.S. authorities' containment efforts have calmed financial instability, the market appears to be regaining stability. Although the U.S. Silicon Valley Bank (SVB) crisis has not been fully resolved yet, there are opinions that the increased volatility due to uncertainty should be used as a buying opportunity.

KOSPI Continues Rising Trend for Second Day

As of 10:15 a.m. on the 22nd, the KOSPI was at 2407.40, up 19.05 points (0.80%) from the previous day. The KOSDAQ rose 6.63 points (0.83%) to 809.16. Following a slight rise the previous day, the KOSPI continued its upward trend, recovering the 2400 level in early trading.

The U.S. government's efforts to contain financial instability and the U.S. stock market's positive close are interpreted as factors behind the domestic market's strength. On the 21st (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 0.98%, the S&P 500 increased 1.3%, and the Nasdaq gained 1.58%. Financial stocks strengthened as concerns over bank risks eased following U.S. Treasury Secretary Janet Yellen's remarks on additional deposit guarantees. First Republic, which had plunged amid fears of becoming the second SVB, surged 29.47%. Regional banks such as West Alliance (14.96%) and PacWest Bancorp (18.77%), as well as major banks including JPMorgan (2.68%), Bank of America (3.03%), and Wells Fargo (2.67%), also showed strong performances.

In her speech at the American Bankers Association, Secretary Yellen stated, "If small banks experience deposit withdrawals with contagion risks, similar measures could be taken." Seosangyoung, a researcher at Mirae Asset Securities, analyzed, "This shows that the U.S. government may temporarily guarantee all deposits. However, since the Republican Party controlling the House opposes expanding guarantees beyond $250,000 and the fund size is small compared to the total deposit volume, the actual implementation likelihood is low. Nevertheless, it positively affected investor sentiment by increasing trust in the banking system."

Secretary Yellen also emphasized, "The current situation is different from the 2008 financial crisis, and the banking system is stronger than back then," adding, "Stability is gradually being restored, and the risk of additional bank failures has decreased." Accordingly, domestic bank stocks are also showing strength. On this day, KB Financial rose 1.55%, Shinhan Financial Group 1.29%, JB Financial Group 1.39%, Woori Financial Group 0.71%, and BNK Financial Group 0.64%.

With the financial authorities' continuous efforts to stabilize the situation, market anxiety seems to be easing. Han Jiyoung, a researcher at Kiwoom Securities, evaluated, "To prevent another bank run, strengthening trust in the financial system to psychologically stabilize depositors is the top priority. The series of containment measures taken by the authorities since last week are judged to have largely fulfilled this." The U.S. government has taken steps such as expanding SVB depositor protection, strengthening central bank dollar swap agreements, and pursuing potential expansion of guarantee targets to prevent the SVB crisis from spreading.

Stock Market Trend Unlikely to Change Due to Financial Instability

Although the stock market showed significant volatility due to financial instability after the SVB bankruptcy, there is a forecast that the overall market trend will not change because of the financial instability issue.

Han, the researcher, said, "Since March, the SVB-related crisis has repeatedly weakened market sentiment with fears of a second Lehman event and systemic risks. However, considering that only the amplitude of stock price fluctuations has increased and the lower bounds of major countries' stock indices remain firm, the instability in small and medium-sized banks triggered by SVB is more of a negative factor that does not damage the existing stock market trajectory."

Since the SVB crisis has not been fully resolved yet, it is not possible to be completely at ease, but future corrections due to this are expected to be buying opportunities. Han said, "Because the SVB crisis is not fully resolved, related anxiety may continue to increase market uncertainty, but it is appropriate to approach the resulting stock price corrections as buying opportunities."