Bank of Korea: "Major advanced economies' stock prices sharply declined after June... China rose"

Trends in the International Financial and Foreign Exchange Markets Since June

[Image source=Yonhap News]

The Bank of Korea explained that since last month, concerns over a global economic slowdown have intensified, leading to a significant decline in stock prices not only in advanced countries such as the United States but also in emerging markets. Amid the Federal Reserve's (Fed) tightening measures causing most countries to raise interest rates, the volatility of the won-dollar exchange rate has also increased.

On the 12th, the Bank of Korea stated in its 'International Financial and Foreign Exchange Market Trends since June' report that "major price indicators in the international financial market showed high volatility influenced by expectations of monetary policy tightening and concerns over a global economic slowdown."

According to the Bank of Korea, based on the developed markets index calculated by Morgan Stanley Capital International (MSCI), stock prices in developed countries fell by 6.7% from the 1st of last month to the 8th of this month.

(Data provided by Bank of Korea)

The United States declined due to expectations of worsening corporate earnings amid consumption slowdown and tightening financial conditions, while Germany showed a similar trend influenced by concerns over natural gas supply disruptions and weak economic indicators.

During the same period, the MSCI Emerging Markets Index fell by 7.2%. The Bank of Korea explained that "stock prices in major commodity-exporting countries such as Brazil, Mexico, and Indonesia declined due to falling commodity prices amid concerns over economic slowdown."

On the other hand, China’s stock prices rose sharply due to the easing of COVID-19 lockdowns, favorable economic indicators, and inflows of foreign stock investment funds. The Caixin Manufacturing Purchasing Managers' Index (PMI) for June, reflecting China's economic sentiment, rose from 48.1 in May to 51.7 in June (expected 50.2).

Interest rates on major developed countries' 10-year government bonds have been on the rise. In the United States, rates surged sharply due to expectations of Fed tightening but slightly decreased amid concerns over economic slowdown, while Germany, South Africa, and Brazil showed similar trends to the U.S.

Conversely, Turkey saw a decline in rates due to market stabilization measures, and Russia’s rates fell following policy rate cuts.

With growing risk aversion amid concerns over a global economic slowdown, the safe-haven U.S. dollar has strengthened, rising 5.2% since last month.

The Japanese yen weakened due to its accommodative monetary policy stance, and the euro also declined amid concerns over economic slowdown.

Emerging market currencies also showed significant weakness. Amid falling commodity prices, currencies of major commodity-exporting countries such as the South African rand and Mexican peso weakened, while the Brazilian real showed relatively larger depreciation due to added concerns over fiscal soundness.

(Data provided by Bank of Korea)

The won-dollar exchange rate is also on the rise due to the Fed’s tightening and concerns over a global economic slowdown. The Bank of Korea explained, "The daily volatility of the won-dollar exchange rate in June increased compared to the previous month."

In June, foreign investors' net investment in domestic securities turned to a slight net outflow (-$780 million). Equity funds decreased by $3.01 billion due to weakened investment sentiment, expanding the decline compared to the previous month ($1.29 billion). Bond funds continued to see net inflows, mainly from private funds.

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