The Curtain Lifted on FOMC... Will the Slumped KOSPI Trading Recover?

KOSPI Trading Volume at 8.2 Trillion KRW the Previous Day... Lowest Level of the Year
One-Fifth of Early Year Level... Heightened Caution Amid Uncertainty
Attention on Whether Investor Sentiment Recovers as FOMC Uncertainty Eases

[Asia Economy Reporter Minwoo Lee] Ahead of the U.S. Federal Open Market Committee (FOMC) meeting, cautious sentiment persisted amid uncertainty, causing KOSPI trading volume to fall to the lowest level this year. Although the overnight FOMC maintained a hawkish stance, uncertainty was resolved, drawing attention to whether domestic stock market sentiment will reignite like the rebound seen in the U.S. stock market.

According to the Korea Exchange on the 16th, the previous day's KOSPI market trading volume was 8.2531 trillion won, marking the lowest level this year. This is the lowest in about 19 months since May 20 last year, when it was 8.2486 trillion won. The trend of declining KOSPI trading volume has continued since the beginning of this month. After falling below 8 trillion won for the first time this year on the 10th, at 8.4349 trillion won, it has already recorded the 8 trillion won level for the third time. Considering that the average daily trading volume this year was 15.6985 trillion won, this is only about half of the usual level. Compared to the highest daily trading volume this year of 44.4338 trillion won recorded on January 11, it is hovering around 20%. Trading has decreased so much that even the KOSDAQ market, whose total market capitalization is only about one-fifth that of KOSPI, is lagging behind in trading volume.

The cautious stance is interpreted as a result of concerns that the economy will shrink again due to the spread of the new COVID-19 variant 'Omicron' and the burden of potentially stronger tightening policies from the U.S. FOMC. In particular, it is analyzed that the reduced interest from individual investors played a significant role. Kwanghyun Kim, a researcher at Yuanta Securities, explained, "From April last year to September, the proportion of individual trading in the KOSPI market exceeded 60% for 18 consecutive months, showing strong individual influence in domestic stock market supply and demand. However, recently, it has returned to the 10-year average level of 49.8%, with 58.1% in October, 57.4% last month, and 48.4% this month."

However, as the FOMC has concluded and the U.S. stock market rebounded, there is a forecast that domestic market sentiment may somewhat recover as well. Although the FOMC maintained its tightening stance, the previously immeasurable uncertainty has shifted into a measurable 'risk.' On the 15th (local time), the U.S. Federal Reserve (Fed) concluded the December FOMC regular meeting and strengthened its hawkish approach by announcing an accelerated tapering (asset purchase reduction) schedule compared to initial expectations. Considering inflation progress and employment improvements, it decided to reduce bond purchases by $20 billion and mortgage-backed securities (MBS) by $10 billion. However, since the outcome was within expectations, the U.S. stock market collectively rebounded as uncertainty was resolved. The Dow Jones Industrial Average closed up 1.08% from the previous day. The S&P 500 and the tech-heavy Nasdaq indices closed up 1.63% and 2.15%, respectively.

However, analysis suggests that the positive impact on the domestic stock market will be limited because the U.S. economic indicators released on the same day fell short of expectations. The November retail sales announced that day increased by 0.3% from the previous month to $639.8 billion, which was below the market expectation of a 0.8% increase compiled by The Wall Street Journal (WSJ). It also showed a significant slowdown compared to the 1.8% increase in the previous month.

Sangyoung Seo, a researcher at Mirae Asset Securities, said, "While the resolution of FOMC uncertainty is positive, the poor retail sales figures will be a burden on the domestic stock market because U.S. retail sales trends lead to U.S. manufacturing production and our country's exports. In the short term, there will be increased expectations for rebound buying, especially in sectors that experienced large declines, but the possibility of continuous expansion of gains is low."

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