Interest Rates Rise, Dollar Strengthens, Stock Market Shows Resilience

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[Asia Economy Reporter Hwang Junho] As the pace of U.S. monetary normalization accelerates, the 10-year Treasury yield surpassed 2% last week. Despite this, the dollar showed strength, which analysts suggest should be viewed positively from the perspective of the domestic stock market.

Seojeonghoon, a researcher at Samsung Securities, stated in the 'Weekly Shot' report, "Despite the sharp rise in interest rates on the U.S. mainland, the limited strength of the dollar is positive," adding, "Typically, liquidity withdrawal by a key currency country pressures capital outflows from emerging markets, but the absence of such signals can be observed here."

In addition to the U.S. Federal Reserve, the fact that major countries are joining the tightening stance indicates that economic conditions have improved enough to accommodate tightening. Above all, the demand for the safe-haven dollar suggests that investor sentiment has not cooled down as much, according to Seojeonghoon's analysis.

In fact, foreign investors are pouring funds into the domestic stock market. This month, foreign investors' net purchases of KOSPI cash stocks reached 1.4 trillion won. In futures, they made net purchases of about 1 trillion won.

The market can be seen as having somewhat adapted to the fear of interest rate hikes. Scenarios such as "rate hikes at every FOMC meeting" or "a 50bp hike at once," which were previously dismissed as minority opinions, are now treated as familiar topics in the market.

It is also encouraging that liquidity conditions in China are easing. The total social financing in China for the first month of the new year, announced last week, recorded 6.17 trillion yuan, significantly exceeding the expected 5.4 trillion yuan and the previous month's 2.4 trillion yuan. China's expansionary credit policy can clearly stimulate the real economy across emerging markets again.

Researcher Seo forecasted, "Although the domestic stock market is showing a pause after a short-term rebound, volatility is gradually subsiding, and this calming trend is expected to continue along with the market's increased resilience to tightening." He added, "Considering that the elevated interest rates will remain a given constant for the time being, the recent fluctuations in small and mid-cap growth stocks are likely to persist," and predicted, "Although it may be hard to feel due to the overall gloomy market sentiment, rotation toward value stocks is likely to proceed further."

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