[Good Morning Stock Market] FOMC and Calm in the Zhonghua Region Stock Markets

[Asia Economy Reporter Junho Hwang] On the 28th (local time), the New York stock market closed mixed as investors focused on the Federal Open Market Committee (FOMC), which determines the direction of U.S. monetary policy. At the FOMC meeting, progress was made toward tapering (reducing asset purchases), and the U.S. Federal Reserve decided to introduce the Standing Repo Facility (SRF), a market support measure that allows banks to replace liquidity even as the Fed reduces it.

On the 29th, the domestic stock market is also expected to be influenced by concerns over the reduction of U.S. liquidity alongside expectations for the new system. Additionally, the recent calming of the 'Greater China market crash,' which had been pressuring the domestic stock market, is anticipated to have an impact.

The market paid close attention to the upcoming $500 billion SRF. Sangyoung Seo, a researcher at Mirae Asset Securities, said, "This policy allows banks holding government bonds to exchange them for reserves at any time during stress situations, stabilizing short-term interest rate volatility," adding, "Since banks can replace liquidity even when the central bank reduces it, the nature of this policy corresponds to quantitative easing."

However, he noted, "Concerns have increased that the tapering pace could accelerate depending on confidence in the economy and the spread of inflationary pressures," and analyzed, "As a result, the U.S. dollar strengthened, short-term interest rates rose, and the index initially fell but stabilized as the market completed its analysis of the system."

He also pointed out that the start of tapering discussions should be considered. Heejin Kwon, a researcher at Korea Investment & Securities, said, "The Fed has formalized that internal discussions are underway to gauge the timing of tapering while maintaining its existing moderate retreat stance." She added, "Since progress toward tapering has already been priced in by the financial markets, there will likely be no particularly negative impact," and "By signaling a green light for gradual tapering and that rate hikes are 'still far off,' the Fed clarified the ambiguous policy direction from the June FOMC, which is likely to be interpreted as a reduction in uncertainty." Accordingly, she predicted, "The downward trend in bond yields seen until mid-month is expected to gradually come to an end."

In the domestic stock market, the calming of the 'Greater China market crash,' which had acted as a downward pressure, is also expected to have a positive effect. Jiyoung Han, a researcher at Kiwoom Securities, said, "The calming of the Greater China market crash, which had been exerting downward pressure on the overall Asian stock markets this week, and the offshore market's won-dollar exchange rate falling again to the 1140 won level are positive factors for the domestic stock market." She further explained, "In the domestic stock market, where the earnings season is in full swing, differentiated stock price movements are expected depending on changes in future earnings outlooks across sectors and individual stocks."

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