[Good Morning Stock Market] First Ever Big Step? Eyes on the 금통위... "Volatility May Increase if Hawkish Moves Occur"

Lee Chang-yong, Governor of the Bank of Korea, is presiding over the Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul, on May 26./Photo by Joint Press Corps

[Asia Economy Reporter Myunghwan Lee] On the 13th, the Korean stock market is expected to show changes depending on the results of the Bank of Korea's Monetary Policy Committee (MPC) meeting scheduled for that day.

The Bank of Korea will hold a monetary policy direction meeting at 9 a.m. that day to discuss whether to adjust the base interest rate. The market widely expects the MPC to implement the first-ever 'big step' (a 0.5 percentage point increase in the base interest rate at once) considering the consumer price inflation rate and concerns about the inversion of the Korea-US base interest rates.

The US stock market closed lower the previous day amid caution ahead of the June Consumer Price Index (CPI) announcement. On the 12th (local time), the Nasdaq index, centered on technology stocks, closed at 11,264.73, down 0.95% (107.87 points) from the previous session. The Dow Jones Industrial Average fell 0.62% (192.51 points) to 30,981.33, and the Standard & Poor's (S&P) 500 index closed at 3,818.80, down 0.92% (35.63 points).

Sangyoung Seo, Head of Media Content at Mirae Asset Securities: "Focus on MPC results... Volatility inevitable if hawkish moves occur"

On the 13th, the domestic stock market is expected to show changes after a slight rise at the start, focusing on Bank of Korea Governor Lee Chang-yong's press conference at the MPC, the won-dollar exchange rate, and foreign investor supply and demand.

With a rate hike almost certain at the Bank of Korea MPC, the market estimates a high possibility of a 0.5 percentage point rate increase. However, since price stability and the global trend of rate hikes by various countries suggest this, the impact of the related results on the stock market is expected to be limited. However, if Governor Lee Chang-yong's press conference shows a more hawkish stance than expected regarding the size and frequency of additional rate hikes, volatility expansion is inevitable.

Meanwhile, despite concerns about a European-origin economic recession, the US stock market showed a firm trend during the session, which is expected to have a favorable impact on the Korean stock market. In particular, the weakness in the software sector due to companies' IT budget cuts is a burden, but the Philadelphia Semiconductor Index's 0.18% gain, led by Micron's rise, is positive for investor sentiment. Of course, considering the increased decline in the late session due to the strong dollar, the market is presumed to be focusing on earnings. Recently, downward revisions of earnings estimates for Korean companies may pose a burden.

Yumi Kim, Researcher at Kiwoom Securities: "Cautious on BOK MPC and US CPI... Expect limited movement"

On the 13th, the domestic stock market is expected to show limited movement influenced by the Federal Reserve's tightening burden, caution ahead of the July MPC, and the US June Consumer Price Index (CPI). Volatility may increase depending on the MPC results during the session and China's June export-import data.

Currently, the interest rate gap between Korea and the US is 0.0 to 0.25 percentage points. The market expects a 0.5 percentage point big step at the MPC. If the big step is realized, it will be the first time in history to implement three consecutive rate hikes following the 0.25 percentage point increases in April and May. This is due to severe inflationary pressure, as the domestic June CPI announced last week rose 6.0% year-on-year. The high possibility of a 0.75 percentage point rate hike at the US Federal Open Market Committee (FOMC) in July also seems to have influenced caution about the inversion of the Korea-US base interest rate gap.

Considering that the US June CPI forecast to be announced on the night of the 13th is as high as 8.9%, if the CPI exceeds 9.0%, it could shock the market similarly to the consumer price shock in May. Additionally, the announcement of Germany's June CPI, amid the energy crisis becoming visible, is also scheduled, which could further increase volatility.

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