[Real Estate Tech] Korean Stock Market Surprised by Giant Step... Dollar-Cost Averaging Strategy Effective

Volatility Expected to Increase Until June FOMC
Interest Rate Rise Forecasted Through July
Domestic Stock Market Likely to Remain in Box Range
Betting on Individual Stocks Over Index
Divide Purchases Below 2700 Level

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] As the pace of monetary tightening in the U.S. accelerates, investors' concerns are deepening. The acceleration of interest rate hike expectations is causing continued volatility in the stock market. Experts believe that the uncertainty in the stock market related to monetary policy will continue until the June FOMC meeting, advising investors to make staggered purchases depending on individual sectors and stocks.

◆The essence is monetary policy... "Volatility will increase until the June FOMC" = The recent volatility in the domestic stock market is attributed to monetary policy. This is due to a series of hawkish remarks from members of the U.S. Federal Reserve (Fed). Fed Chair Jerome Powell indicated a 'big step' of a 50 basis point rate hike at the May FOMC, stating that the inflation peak has not yet been reached. Additionally, James Bullard, President of the St. Louis Fed, hinted at the possibility of a 'giant step' of a 75 basis point hike, spreading concerns in the market that the rate hike trend will continue from May through July. According to FedWatch estimates, there is a 94% chance of a 75 basis point hike at the June FOMC, and about an 85% chance of a 50 basis point hike in July.

Accordingly, the domestic stock market is expected to continue in a box range with volatility persisting until June. Labor Gil, a researcher at Shinhan Financial Investment, analyzed, "The June FOMC will be the first opportunity to confirm the Fed's medium- to long-term outlook after the release of economic data related to the prolonged Russia-Ukraine war."

Han Ji-young, a researcher at Kiwoom Securities, also observed, "Until the June FOMC, interest rate forecasts will vary depending on Fed members' remarks. The market has already largely priced in a 75 basis point hike at the June FOMC, and currently, the Fed is in a blackout period where members' comments are prohibited, which could increase market participants' anxiety."

◆"Focus on individual stocks rather than indices... Make staggered purchases below the 2700 level" = Experts foresee a market driven by individual stocks based on earnings rather than betting on indices.

One researcher stated, "Although the aftereffects of the tightening shock are expected to spread domestically, the current KOSPI valuation and technical indicators suggest low liquidation incentives, so staggered purchases below the 2700 level are expected to be effective. A differentiated market will emerge depending on how well earnings expectations are met across individual sectors and stocks."

Researcher Noh added, "It is difficult to bet on the overall index, so selecting sectors and industries that can enhance earnings reliability is important. The industrials and financial sectors, whose profit forecasts were revised upward just before the Q1 earnings season, have high reliability. Additionally, sectors such as telecommunications, consumer staples, trading companies, and capital goods, which have historically shown low margin volatility, are also worth attention," he advised.

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