[FOMC만 보는 코스피] Technology stock’half color’ when buying bonds…

KOSPI’s trading value sharply decreased by 40% from the previous month

Stock market disappointment may increase if the Fed’s existing position is repeated

There is also a possibility that the sideways sideways will be longer if the principle position comes out.

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The gaze of the domestic stock market is turning to the mouth of Jerome Powell, chairman of the Federal Reserve System (Fed). This is because of the observation that another big impact could be delivered according to the results of the US Federal Open Market Committee (FOMC) held on the 16th to 17th (local time) to the KOSPI, which experienced a major shock from the rise in US interest rates.

According to the Korea Exchange on the 16th, KOSPI’s transaction price is sharply decreasing ahead of FOMC. In fact, the transaction price of KOSPI on this day is estimated at 12,761.7 billion won. This is a sharp drop of about 40.7% from February 26th (21 trillion 504.9 billion won). On the 15th, the previous day, KOSPI’s transaction price (12.58 trillion won) has also been shown to drop down to 12 trillion won for the first time since November 26 last year. As the US market interest rate is pointed out as the main variable in the financial market, the interpretation that the wait-and-see tax to watch the FOMC is underlying is predominant.

In the stock market, the biggest concern is whether the Fed will respond more actively to rising US Treasury yields. In other words, can the Fed express its intention to implement bond yield control (YCC, yield curve control) to suppress the rising long-term interest rate? YCC refers to a method in which the central bank sets a certain upper limit on the interest rate and controls the interest rate through purchase of bonds. If the Fed pulls out such a card, it is highly likely to be a significant boon for the domestic stock market. In particular, it is observed that it is more positive from the standpoint of technology and growth stocks that were hit directly by rising interest rates. Dae-hoon Han, a researcher at SK Securities, said, “If FOMC succeeds in stabilizing the market, the sentiment on technology stock investment will recover quickly.”

However, there are many views that the Fed is unlikely to pull out the card right now. It is the logic that it lacks justification to implement this right away just because the stock price of technology stocks represented by NASDAQ has fallen. This is especially true in light of the fact that the Dow Index continued to record all-time highs despite rising interest rates. In addition, concerns that a rebound in risky assets and rising raw materials could stimulate inflation also fuel this observation. Chairman Powell also stressed that he would watch more, saying, “As inflation is temporary, the Fed will be patient.”

Instead, the expectation that the Fed will keep the stance of monetary easing and not mention only the fundamental views is somewhat predominant. In this case, there are also observations that the stock market, including the KOSPI, may show disappointment. Lee Kyung-min, a researcher at Daishin Securities, said, “There is a possibility that we may maintain the existing position on liquidity policy, which may lead to disappointment. In this case, the bond rate will rise once again and the financial market will be exposed to volatility.” However, there are many explanations that the direction of the market itself is not easy to go downhill. Jeong Yong-taek, head of IBK Investment & Securities Center, said, “After FOMC, the market has been more sideways, but when visible changes, such as mitigating the spread of the novel coronavirus infection (Corona 19), are expected to show an upward trend,” he said.

It is considered the worst case scenario that liquidity tightening such as taper is mentioned. However, given the status of the unemployment rate in the United States, it is explained that this is also unlikely. Chairman Powell also said, “If tapering is done, we will send a signal in advance.”

/ Reporter Lee Wan-ki [email protected]

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