[MarketING] KOSPI Hits Lowest This Month Amid US FOMC Minutes Concerns

KOSPI Falls to 2410 Level
Apprehension Over February FOMC Minutes Release
Won-Dollar Exchange Rate Reenters 1300 Won Range Amid Tightening Concerns

[Image source=Yonhap News]

[Asia Economy Reporter Song Hwajeong] The KOSPI fell to the 2410 level, marking its lowest point this month. As concerns over tightening expanded, the won-dollar exchange rate re-entered the 1300-won range, and with caution spreading ahead of the release of the February U.S. Federal Open Market Committee (FOMC) minutes scheduled for the following day, stock prices were pulled down.

KOSPI Drops Below 2420

On the 22nd, the KOSPI closed at 2417.68, down 41.28 points (1.68%) from the previous day. The KOSDAQ ended the session at 778.51, down 14.91 points (1.88%).

Influenced by a more than 2% plunge in major U.S. indices the previous day, the KOSPI started the day down over 1% and failed to reduce its losses amid selling pressure from foreigners and institutions, dropping below the 2420 level. This is the first time the KOSPI has fallen to the 2410 level this month. The KOSDAQ also fell below the 780 level.

Concerns over U.S. tightening pushed the won-dollar exchange rate above 1300 won, further increasing foreigners' desire to realize profits. In the Seoul foreign exchange market that day, the won-dollar exchange rate closed at 1304.9 won, up 9.0 won from the previous day. This is the first time the closing price has exceeded 1300 won since December 19 last year (1302.9 won). Foreigners net sold 244 billion won in the KOSPI market and 306.4 billion won in the KOSDAQ market. Institutions also sold 687.5 billion won and 207.7 billion won respectively, dragging the indices down. Although individuals alone net bought 887 billion won and 524.4 billion won, it was insufficient to defend the indices.

Kim Seokhwan, a researcher at Mirae Asset Securities, explained, "Both the KOSPI and KOSDAQ showed a weak trend with losses widening in the afternoon session. The previous day’s U.S. stock market decline, driven by inflation concerns following improved economic indicators and a sharp rise in Treasury yields, mainly affecting tech stocks, weighed on Asian markets overall."

The dollar's strength due to tightening concerns is expected to negatively impact supply and demand. Kim Younghwan, a researcher at NH Investment & Securities, said, "The dollar's strength could act as a short-term adjustment factor for the stock market. However, this concern may ease as additional U.S. inflation and employment data are confirmed."

There is an opinion that the adjustment following the earlier optimism due to reduced expectations for rate cuts is natural. Jung Yongtaek, a researcher at IBK Investment & Securities, said, "Market consensus, which until mid-January expected the March FOMC rate decision to be the last rate hike, has shifted to forecasts of continued rate hikes through May and June, with the terminal rate rising from 5.0% to 5.5%. Considering the recent sharp increase in volatility of price variables such as interest rates, the rapid rate hike end and 'pivot' expectations at the start of the year overheated the financial and foreign exchange markets, so this adjustment movement is natural."

Focus on February FOMC Minutes

Market attention is focused on the February FOMC minutes to be released early on the 23rd.

The most important part of these minutes is to confirm the Fed’s future policy direction and its internal views on the U.S. economy. Researcher Kim said, "The most important part of the first FOMC minutes of this year is to see the Fed’s internal discussions about the path forward and the state of the U.S. economy. As of December, the personal consumption expenditures (PCE) price index recorded 5.0% year-on-year, and the core PCE price index was 4.4%, far exceeding the Fed’s 2% target, showing that the Fed should not stop tightening." He added, "Fed Chair Jerome Powell judged that it was appropriate to moderate the pace of rate hikes but firmly said 'No' to stopping tightening, stating that continuous increases within the target range would be appropriate. Ultimately, the views of Chair Powell and Fed members will influence market sentiment."

With the minutes expected to be hawkish, if they meet market expectations, the sharp decline is likely to ease. Researcher Kim said, "Although a generally hawkish tone is expected, since the market outlook is even more hawkish, if the minutes align with the levels discussed so far, the pressure for further increases in Treasury yields will ease, and a rebound buying wave that could reverse the previous day’s decline is expected to flow in."

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