[Good Morning Stock Market] Concerns Over Prolonged Monetary Tightening... KOSPI Expected to Fall 0.7%

On the 22nd, the KOSPI is expected to start down 0.7%. This is anticipated to be influenced by the broad decline in the U.S. stock market due to concerns over prolonged monetary tightening.

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On the 21st (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,070.42, down 370.46 points (1.08%) from the previous trading day. The S&P 500, which is centered on large-cap stocks, recorded 4,330.00, down 72.20 points (1.64%). The tech-heavy Nasdaq index closed at 13,223.99, down 245.14 points (1.82%).

The New York stock market declined due to concerns over prolonged monetary tightening. The Federal Reserve (Fed) influenced this by signaling additional rate hikes, known as a 'hawkish pause.' According to the Fed officials' dot plot showing rate projections, they expect one more 0.25 percentage point increase this year. Notably, the year-end rate projection for next year was presented at 5.1%. This is only a 0.5 percentage point decrease from this year's year-end projection of 5.6%. Risk aversion sentiment has strengthened due to the prolonged high interest rate environment.

In the New York bond market, government bond yields also rose across the board. The 10-year yield approached 4.5%, marking the highest level since 2007. The 30-year yield reached 4.55%, the highest since 2011.

Han Ji-young, a researcher at Kiwoom Securities, said, "The hawkish September Federal Open Market Committee (FOMC) aftershock, including the 10-year yield nearing the 5% range and mixed results among key indicators, led to a decline at the close."

Due to the decline in the New York stock market, the KOSPI is expected to start down 0.7% compared to the previous trading day. Seo Sang-young, a researcher at Mirae Asset Securities, said, "The clear weakness in tech stocks caused by rising U.S. Treasury yields is expected to weigh on the Korean stock market. Additionally, the continued slowdown in leading economic indicators suggests that the U.S. economy may not be as strong as expected, which is a factor dampening investor sentiment in the export-dependent Korean market." He added, "Considering the weakened momentum in AI-related stocks and the significant decline in related shares, the 1.76% drop in the Philadelphia Semiconductor Index is also a factor contributing to poor investor sentiment."

The securities industry advises a strategy of buying undervalued large-cap stocks. Researcher Han Ji-young explained, "Ahead of the long holiday, there is a tendency to reduce positions to prepare for uncertainty, and downward pressure is dominant due to individual investors' tax-avoidance selling. There are no short-term rebound triggers. However, after the holiday, attention is focused on Samsung Electronics' preliminary earnings announcement in early October, which is expected to raise earnings forecasts. Also, the September quarterly dividends have ended, so at this point, a strategy of buying undervalued large-cap stocks is effective."