[Good Morning Market] "CS Risk... Domestic Stock Market Expected to Start Slightly Lower"

On the 16th, the domestic stock market is expected to start slightly lower. It is inevitable to be affected by the risk arising from Credit Suisse (CS), Switzerland's second-largest bank. However, rather than widening the decline, it is expected to maintain a solid trend centered on large-cap stocks.

The New York stock market was highly volatile as CS's stock price plunged more than 30% intraday. Major indices fell more than 2% during the session, but the Nasdaq index rebounded late in the session after the Swiss National Bank (SNB) announced support measures for CS.

(Photo by Reuters, Yonhap News)

On the 15th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 31,874.57, down 280.83 points (0.87%) from the previous session. The Standard & Poor's (S&P) 500 index fell 27.36 points (0.70%) to 3,891.93, while the Nasdaq index closed up 5.90 points (0.05%) at 11,434.05.

Investors focused on concerns about CS's financial soundness and economic indicators. CS, a Swiss bank, saw its stock price plunge about 30% intraday in the European market, and its American Depositary Receipts (ADR) price also dropped more than 20% intraday, worsening investor sentiment toward the banking sector. The collapse of a U.S. bank is spreading concerns to European banks.

Sangyoung Seo, a researcher at Mirae Asset Securities, expressed concern over the highlighted economic recession. Seo said, "CS sharply declined after mentioning in its annual report that internal controls over financial reporting were ineffective, and the largest shareholder, Saudi National Bank, announced that additional investments are impossible due to regulations, which burdens the domestic stock market." He added, "However, the Swiss government's discussion of options to support CS and the Swiss National Bank's statement that it will provide liquidity if necessary are expected to have a positive impact."

Jiyoung Han, a researcher at Kiwoom Securities, predicted, "The domestic stock market is expected to show limited price movement," adding, "There will be mixed sentiments from concerns about banking sector crises such as the aftershocks of the SVB incident and additional financial instability triggered by CS, as well as expectations for government policy support to respond to the crisis."

Since the beginning of this week, the U.S. futures market has experienced increased price volatility due to frequent news related to banking sector crises even after the main session closes, affecting Asian markets including Korea. Therefore, it is necessary to monitor the price trends of the U.S. futures market during the domestic trading session as well.

Han said, "Unlike the SVB incident in the U.S., the CS stock price plunge was not directly caused by the central bank's tightening shock." However, "amid the unresolved aftershocks of the SVB incident, the emergence of a crisis from CS, a major European bank with greater symbolic significance than SVB, seems to have further stimulated market participants' concerns about liquidity instability or systemic risk in the banking sector." He continued, "Nevertheless, the current volatile market phase is considered manageable," adding, "It is important to note that financial authorities such as the government and central banks are responding more swiftly compared to the 2008 financial crisis, and this banking sector setback lacks the characteristics of a new large-scale sudden shock."

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