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Market in wait-and-see mode over BOK’s rate-setting, US Fed meeting

(123rf)
(123rf)
With South Korea’s benchmark Kospi plunging below the 3,100-point level last week over the US tapering jitters, the market is closely watching the outcomes of the upcoming monetary meetings at the Korean central bank and the US Federal Reserve this week.

The Bank of Korea is widely expected to raise its key rate by 25 basis points to 0.75 percent after its upcoming rate-setting meeting on Thursday. The decision will be undertaken in an effort by the central bank to maintain financial stability amid the virus resurgence, local analysts said Monday.

Hana Financial Investment analyst Lee Mi-seon said the forecast takes into account the strong intention of both the BOK and the government to rein in runaway property prices. Although there is a possibility that one person could object to the rate hike during the meeting, the central bank governor’s comments and stance are extremely important, she said.

Another analyst, Heo Jeong-in of KTB Investment & Securities, said, “If the base rate freezes, it is likely to push up the won-dollar exchange rate.” Heo said it would allow the bearish stock market to be corrected a step further, while adding that a rate hike was “most pertinent” at the moment.

The annual symposium on the US Fed’s monetary policy framework, the Jackson Hole meeting, is to follow the BOK’s meeting and run Thursday to Saturday (local time). Since the recent market volatility was caused by the tapering issue, the outcome of the meeting will likely influence indexes’ directions, experts said.

“A tapering scenario is expected to be discussed during the Jackson Hole meeting. ... Based on the outcome, a signal of whether to start tapering within this year or not is forecast to be determined during September’s Federal Open Market Committee meeting. The actual action will likely take place either in November or December,” Hyundai Motor Securities analyst Oh Chang-sub said.

Yet some market watchers, including KB Securities analyst Ha In-hwan and Mirae Asset Securities analyst Park Hee-chan, still foresee local indexes showing limited movements for the time being since the upcoming annual conference cannot suggest a “clear decision” on tapering. Other factors surrounding the market affect stock movements as well, they said.

The Kospi index retreated 3.5 percent on-week as of Friday, marking the steepest weekly fall since Jan. 25-29. It was led by a selling spree by foreign investors for a ninth consecutive session, with the investors having offloaded a net 8.25 trillion won ($7.03 billion) from Aug. 9 until Friday. The tech-heavy Kosdaq index also plummeted 7 percent on-week, which was the steepest weekly drop in 11 months.

Heo Jae-hwan, an analyst at Eugene Investment & Securities, said the massive foreign sell-offs last week occurred due to a gloomy outlook for the chip industry, continued virus woes and a capital hemorrhage amid China’s regulatory grip on certain industries. The buying of local stocks by offshore investors is likely to remain weak for a while, he added.

The expert also mentioned that retail investors’ net purchases can be reduced by financial authorities’ regulations on temporarily halting banks’ home-backed loans. Amid snowballing personal credit loans taken out for stock investments, their additional capital injections to buy stocks are likely to be very limited, the expert said.

Meanwhile, the main bourse rose 0.97 percent to close at 3,090.21 on Monday. The index once recovered to the 3,110-point level during trading fueled by foreign and institutional investors’ net purchases. But offshore investors ended up remaining net sellers at the closing bell.

The secondary bourse also advanced 2.61 percent to 993.18, as foreign investors and institutions hoisted the index by scooping up the local stocks together. Retail traders, however, turned net sellers at both the Kospi and Kosdaq markets, ending their two-day buying spree.

By Jie Ye-eun (yeeun@heraldcorp.com)
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