[Special Stock] Kakao and Financial Affiliates Fall Amid Earnings Decline and Interest Rate Hike

[Asia Economy Reporter Hwang Yoon-joo] Kakao and its financial affiliates are all declining due to downward earnings forecasts and the impact of interest rate hikes.

As of 9:37 AM on the 14th, Kakao is trading down 1.53% (1,100 KRW) at 70,800 KRW. Kakao Pay is down 1.48% (1,000 KRW) at 66,400 KRW, and Kakao Bank is down 3.64% (1,150 KRW) at 30,450 KRW.

On the previous day, securities firms forecasted that Kakao's second-quarter operating profit would fall short of expectations. This is based on an analysis that the growth rate of Talk Biz, which accounts for the largest portion of sales, will be lower than expected.

[Image source=Yonhap News]

The second-quarter net profit forecast for Kakao Bank was also revised downward due to additional provisions set aside following recommendations from financial authorities. Kakao Pay is also expected to see a larger operating loss in the second quarter.

Along with poor earnings, the interest rate hike appears to have affected stock prices. When interest rates rise, the discount rate on future cash flows of growth stocks increases, which negatively impacts stock prices.

Earlier, the U.S. Department of Labor announced that the Consumer Price Index (CPI) inflation rate for June was 9.1% year-on-year. This is the highest level in 40 years and 7 months since December 1981 (8.9%). As a result, there is speculation that the Federal Reserve may raise rates by 100 basis points (1 bp = 0.01 percentage points) at the July Federal Open Market Committee (FOMC) meeting.

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