Despite Generous US Stimulus... Asian Stock Markets Remain Unmoved

[Image source=Yonhap News]

[Asia Economy Reporter Eunmo Koo] The U.S. central bank, the Federal Reserve (Fed), took measures such as lowering the benchmark interest rate to 'zero (0)' level in response to the impact of the novel coronavirus disease (COVID-19), but major Asian stock markets including the KOSPI are showing a lukewarm reaction.

On the 16th, the KOSPI opened at 1805.43, up 33.99 points (1.92%) from the previous trading day. The KOSPI, which started the day with gains, has been fluctuating around the 1770 level in mixed trading during the early session. As of 10:30 a.m., it recorded 1776.12, up 4.68 points (0.26%) from the previous day.

Looking at the current trading trends by participant, institutional and foreign investors are net sellers of 300.3 billion KRW and 296.4 billion KRW respectively. On the other hand, individual investors are net buyers of 585.7 billion KRW. Among the top market capitalization stocks, Celltrion, SK Hynix, and Samsung Biologics are rising, while Naver, Samsung C&T, and Hyundai Mobis are falling.

Major Asian stock markets are also mostly staying flat. The Nikkei 225 index in Tokyo opened at 17,586.08 points, up 155.03 points (0.88%) from the previous trading day, but like the KOSPI, it is showing mixed trends. As of 10:30 a.m., it recorded 17,440.50 points, up 9.46 points (0.05%) from the previous day.

Earlier, on the 15th (local time), the Fed abruptly lowered the benchmark interest rate to 'zero' level in response to the COVID-19 impact. The Fed announced that it would cut the benchmark interest rate by 1 percentage point from the previous 1.00%?1.25% range to 0.00%?0.25%. It also decided to purchase $700 billion worth of government bonds and mortgage-backed securities (MBS) to expand liquidity supply.

Despite the Fed's aggressive stimulus measures, the market has not reacted strongly, which is analyzed to be because the Fed's rate cut and asset purchases were already anticipated by the market. KB Securities researcher Younghwan Kim explained, "Even until last week, the interest rate futures market had priced in a 90% chance of a zero interest rate cut," adding, "Since the Fed's stimulus was not a surprise, its effect on triggering a sharp market rebound is weak."

To reverse the current situation, it is pointed out that ultimately a slowdown in the spread of COVID-19, vaccine development, and the announcement of strong fiscal policies by the government are necessary. Researcher Kim said, "The sharp rebound in the U.S. market last Friday was largely influenced by President Trump's declaration of a national emergency," adding, "This shows how much the market's expectations for government fiscal stimulus are significant."

This content was produced with the assistance of AI translation services.