Securities Industry Eyes FOMC: "KOSPI May Drop to a Low of 2050..."

Increased Sustainability of Austerity Phase
Difficult to Prevent Downward Trend
Holding Cash Over Increasing Stock Allocation

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Junho] "There was no turning point."

On the 21st (local time), following the third giant step (a 0.75% increase in the base interest rate) at the U.S. Federal Open Market Committee, this was the general reaction from the securities industry analyzing the remarks of Jerome Powell, Chairman of the U.S. Federal Reserve (Fed). It is evaluated that as preference for safe assets increased, the bottom of emerging markets like South Korea's stock market opened, and the key issue became how far it would fall.

As of 9:06 a.m. on the 22nd, the KOSPI is down 1.02% at 2323.34. Samsung Electronics recorded a 52-week low (54,500 KRW), and other large-cap stocks are also on a downward trend. After the U.S. announced its intention to continue a high-intensity tightening stance the previous day, the stock market, which had hoped for a turning point, is gradually sinking.

Lee Kyung-min, a researcher at Daishin Securities, said, "The mid- to long-term trend of the global stock market, including the KOSPI, has become clear," adding, "It has been reconfirmed that the market will inevitably suffer for a considerable period from the double burden of high-intensity tightening, expanded global economic uncertainty, and weakening economic momentum." He suggested the 2050 level as the bottom of the KOSPI in this downward trend.

Kang Dae-seok, a researcher at Yuanta Securities, said, "Unlike the stock market downturn in June, the stability of expected inflation continues, which is a difference, but when broken down, sectors such as insurance and banking, which have a high correlation with real interest rates, and individual sectors like reopening-related ones move according to their issues," adding, "It is expected that such market conditions will continue under the influence of interest rates."

Kim Jun-young, a researcher at Heungkuk Securities, explained, "Although Chairman Powell's press conference was uneventful, the U.S. stock market widened its decline," adding, "Before the new forecast appeared, the final base interest rate forecast of 4.25~4.50% that emerged after last week's U.S. Consumer Price Index (CPI) announcement had not yet been reflected in the stock market, so there is room for further decline." With this U.S. rate hike, the policy rate rose from 2.25~2.5% to 3.00~3.25%. However, six Fed members expect the final base rate to rise up to 5% next year, which is more than 1 percentage point higher than the June forecast.

Interest rates and exchange rates are expected to rise further. Ann Yeha, a researcher at Kiwoom Securities, said, "the USD/KRW exchange rate is linked to the dollar flow and can break above 1,400 KRW per dollar, and it is necessary to keep the upper range open to the high 1,400 KRW range next year." Also, "Considering the policy rate hike trend next year, the U.S. 10-year bond yield should be kept open up to 4% within this year and responded to accordingly," she predicted.

In this situation, increasing cash holdings is considered the best strategy. Researcher Lee Kyung-min said, "It is necessary to reduce the stock ratio, and from a portfolio investment perspective, it is recommended to increase the proportion of dividend stocks (telecommunications, non-life insurance, etc.) and defensive stocks (telecommunications, food and beverage, etc.)." He emphasized, "Even if a rebound occurs, it is necessary to strengthen the strategic stance."

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