[Good Morning Stock Market] Rising US Treasury Yields... "Valuation Pressure on Tech Stocks"

10-Year U.S. Treasury Yield Trend (Source: Investing.com Capture)

[Asia Economy Reporter Ji-hwan Park] Recently, with the US 10-year Treasury yield rising to around 1.35% and continuing its upward trend, there are assessments that this will put pressure on technology stocks. In particular, the Korean stock market, which has a high weighting of the IT sector, is expected to react more sensitively to interest rate trends.

◆ Sangyoung Seo, Researcher at Kiwoom Securities = It looks to be a volatile week due to additional US stimulus measures and changes in interest rates. The Korean stock market is expected to experience a highly volatile period as inflationary pressures and expectations for additional US stimulus measures collide. Inflationary pressure is driving weakness in the bond market, especially in long-term US bonds. This trend is becoming a valuation burden for technology stocks, which have a high weighting in global stock markets. In particular, the Korean stock market, with its high IT sector weighting, is expected to respond more sensitively to interest rate trends. However, as Fed Chair Powell continues to make statements at congressional hearings to ease tapering concerns and increase the possibility of interest rate stabilization, related burdens are likely to ease. On the other hand, the fact that the US is about to pass additional COVID-19 stimulus measures and the expanding expectations for a $3 trillion US infrastructure investment are expected to lead to strength in related stocks. Still, uncertainties remain, such as interest rate changes due to inflationary pressure, whether China will absorb liquidity, and uncertainties about additional US stimulus measures, so the index is expected to show a highly volatile trend.

◆ Jiyoon Kim, Researcher at Daishin Securities = Heightened caution about inflation is leading to rising interest rates. Although the rise in interest rates has stirred anxiety in the stock market, the correction in the market has been limited. The weekly return of global stock indices was only down 0.4%. The Biden administration’s large-scale stimulus policies, vaccine distribution, and solid Q4 earnings are supporting risk asset preference.

◆ Kyungmin Lee, Researcher at Daishin Securities = Interest rate variables have cracked the prevailing optimism and bullishness in the global financial market. Following the US Producer Price Index (PPI) surprise that triggered inflation concerns, the US 10-year Treasury yield surpassed 1.3%, making the global financial market sensitive again to inflation and rising interest rates. As seen in recent market trends, rising interest rates lead to increased valuation burdens and profit-taking in growth stocks. Conversely, a reversal to falling interest rates can be perceived as economic slowdown and strengthened preference for safe assets. Especially, if economic indicators weaken and interest rates fall, global stock markets will show a more unstable trend.

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