KOSPI Also Relieved by 'Powell's Confidence in the Economy'... Attempts to Rebound to 2500 Level Recovering Losses

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 16th, the domestic stock market, which started higher, is rebounding as it recovers from the previous day's decline. As the panic selling subsides, a strong rebound of over 2% is being observed. The New York stock market interpreted the unprecedented interest rate hike in 28 years as a factor that could control inflation, leading to a relief rally, and the domestic market seems to have accepted this as an opportunity for price stability recovery.

On this day, the KOSPI opened at 2,481.66, up 34.28 points (1.40%↑), and the KOSDAQ opened at 812.95, up 13.54 points (1.69%↑). As of 10:23 a.m., the KOSPI recorded 2.06% gain at 2,497.83, continuing attempts to recover the 2,450 level. The KOSDAQ also showed a strong rebound, rising 2.76% to 821.51.

The U.S. New York stock market on the 15th (local time) closed higher despite the Federal Reserve's (Fed) 'Giant Step' (0.75 percentage point interest rate hike), leading to a relief rally. The Dow Jones Industrial Average closed at 30,668.53, up 303.70 points (1.00%) from the previous session. The Standard & Poor's (S&P) 500 index rose 54.51 points (1.46%) to 3,789.99, and the tech-heavy Nasdaq index surged 270.81 points (2.50%) to close at 11,099.15.

Recently, the New York stock market, which had plunged due to news that U.S. inflation had worsened, rose as the Fed raised the benchmark interest rate by 0.75 percentage points as expected at the June Federal Open Market Committee (FOMC) regular meeting held that day. The market seemed relieved by the expectation that the measure would help curb inflation, which hinders economic growth, and aid in price stability recovery. Moreover, Fed Chair Jerome Powell's expression of confidence in the economy also injected positive sentiment into the market.

Lee Kyung-min, a researcher at Daishin Securities, explained, "With the resolution of uncertainty over the overnight rate hike, combined with Chair Powell's determination to control inflation and confidence in the economy, the financial market showed a turnaround," adding, "It is expected that the anxiety of investors who had anticipated the Fed stance and current fundamentals ahead of the June FOMC will calm down." Accordingly, Lee analyzed that a retracement process following the recent sharp decline will unfold based on the 2,400 level.

Foreign investors, who had been dominant sellers for 10 consecutive trading days from the start of the session, have switched to buying at this time. They are purchasing 100.6 billion KRW and 28.7 billion KRW in the KOSPI and KOSDAQ markets, respectively. Institutions are also net buyers, purchasing 25.6 billion KRW and 25.2 billion KRW in the two markets, respectively. Individual investors switched from a buying advantage to selling in the early session amid the market rebound.

Seo Sang-young, head of the Media Content Division at Mirae Asset Securities, said, "The fact that the U.S. stock market rose despite a 75bp rate hike is positive for the Korean stock market," adding, "Since the previous day's foreign selling caused a larger drop compared to other countries, a rebound inflow can occur, and the Korean stock market is stabilizing, starting with a rise of over 1%."

Han Ji-young, a researcher at Kiwoom Securities, said, "The domestic stock market, which hit a new low due to panic selling in the previous trading day, rebounded today thanks to the fading impact of the Fed's June Giant Step and the sharp drop in the won/dollar exchange rate (currently down more than 10 won offshore)," adding, "However, the direction of oil prices, which most significantly affect expected inflation, has become important, and the market needs to digest the June consumer price index scheduled for July (expected to confirm peak-out) and the July FOMC event (expected 75bp hike) for a full relief rally to unfold."

Meanwhile, the top market capitalization stocks are also rising across the board. In particular, the leading stock Samsung Electronics has broken away from a four-day streak of 52-week lows and is rising more than 1%. It has also escaped the crisis of the 50,000 KRW level. Shinhan Investment Corp. said, "Although the short-term valuation decline due to the rise in market discount rates is uncomfortable, this has been largely reflected," adding, "Considering that macro uncertainties have been pre-reflected and that this is a severely supply-constrained phase, Samsung Electronics' stock price is expected to enter a phase where it outperforms the KOSPI."

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