[Good Morning Stock Market] Cryptocurrency Market Crash... Impact on Domestic Stock Market?

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[Asia Economy Reporter Ji-hwan Park] The risk asset avoidance phenomenon, which began with the sharp decline in the cryptocurrency market including Bitcoin, is drawing attention to how it will affect the domestic stock market.

Overnight, the New York stock market closed lower as investor sentiment was damaged by the plunge in cryptocurrency prices. On the 19th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,896.04, down 164.62 points (0.48%) from the previous day. The S&P 500 index fell 12.15 points (0.29%) to 4,115.68, and the tech-heavy Nasdaq index closed at 13,299.74, down 3.90 points (0.03%).

Domestic stock market experts expect that the risk asset avoidance sentiment caused by the sharp drop in cryptocurrency prices could also weigh on the domestic stock market, but they foresee the impact to be limited.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = On Tuesday, the U.S. stock market showed a solid performance but weakened due to Treasury Secretary Yellen’s strong stance on corporate tax hikes and House Speaker Pelosi’s remarks on boycotting the China Winter Olympics. Considering these are factors that could escalate U.S.-China tensions, they negatively affect investor sentiment. On Wednesday, the U.S. stock market also showed weakness centered on stocks with high valuation burdens due to the cryptocurrency market collapse, which is a negative factor for the Korean stock market.

Additionally, the release of the FOMC minutes suggested that the Federal Reserve may begin tapering discussions if the economic recovery accelerates, leading to a rise in Treasury yields, which is also a burden. Considering these changes, the Korean stock market is expected to start lower due to the expansion of U.S.-China tensions and the burden on stocks with high valuation. In particular, attention should be paid to the highlighted risk asset avoidance phenomenon, such as the widening weakness in commodity markets. This could negatively affect foreign investor demand.

However, the Philadelphia Semiconductor Index rebounded 1.98% after falling 0.86% the previous day, which is positive. The declining trend in new COVID-19 cases in India and the stabilization of IT-related factories in Taiwan are also favorable factors. Considering this, despite the burden on foreign investor demand and the weakness in stocks with high valuation, the Korean stock market is expected to see a rebound buying trend centered on stocks with strong earnings expectations, resulting in a limited decline.

◆ Jiyoung Han, Researcher at Kiwoom Securities = The Korean stock market is expected to face downward pressure due to the weakness in major Asian markets such as Nikkei (-1.6%) and Shanghai (-0.5%) during the domestic holiday period, the weakness in the U.S. and European stock markets over two trading days from the 18th to 19th, and the collapse of the cryptocurrency market. Since many domestic investors have also invested in cryptocurrencies, the cryptocurrency market crash the previous day could dampen risk asset preference sentiment in the domestic stock market as well.

However, since cryptocurrencies inherently carry greater risks such as loss potential and price volatility compared to other risk asset classes like stocks, it is judged that the impact on the stock market will be limited. The April FOMC minutes, which many participants were cautious about, were digested well by the U.S. stock market the previous day, and the ongoing trend of economic normalization and corporate earnings improvement is expected to support the market’s downside.

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