Three thousand blood collapses… Interest rate seizure anxiety was greater than expected from the US stimulus plan

The Kospi fell below 3000 again. It was only 7 trading days after the 24th of last month that’Three thousand blood’ was broken based on the closing price. As the US Senate passed an economic stimulus plan worth $1.9 trillion (about 2153 trillion won), concerns over a surge in long-term interest rates are burning. Experts believe that market instability may persist until the US Federal Reserve (Fed) mentions specific measures for a surge in long-term interest rates.

According to the Korea Exchange on the 8th, on this day, KOSPI recorded 2996.11, down 1.0% from the previous trading day. In the early part of the market, the KOSPI started with strong expectations for the US economic stimulus, but from the afternoon, foreign investors and institutional investors turned to weak due to mass selling of institutional investors, and the decline ended. Foreigners sold 125.8 billion won worth of net sales on that day and 3777 billion won worth of institutions. On this day, foreigners and institutions continued the trend of selling growth stocks and buying value stocks. Usually, when long-term interest rates go up, preference for value stocks with high dividend yields intensifies.

The 10-year Treasury bond yield, which represents the US long-term interest rate, has recently soared to 1.6%. In the meantime, when the US long-term interest rate exceeds 1.5~1.7%, the market interprets that the yellow light will turn on. This is because the average dividend yield of the US S&P500 is 1.5%. Jeong Yong-taek, head of the IBK Investment & Securities Research Center, said, “The market is dominated by concerns that interest rates will skyrocket as the US introduces a large-scale economic stimulus package.” Said.

The stock that foreigners bought the most on this day was KB Finance, which was worth 117.4 billion won. Following KB Finance, it attracted attention by intensively buying high-dividend stocks such as POSCO, Shinhan Holdings, and SK Innovation. The institution bought Kia and Hyundai Steel the most on this day, but high-dividend stocks such as Shinhan Holdings, POSCO, and Hana Financial Holdings also net bought in large quantities. On the other hand, foreigners and institutions net sold large stocks that led the KOSPI to rebound after the corona 19 pandemic last year. Both foreigners and institutions net sold Samsung Electronics the most, and SK Hynix, Naver, and Kakao also ranked in the top net selling positions. However, as an individual investor bought Samsung Electronics worth 2176 billion won on that day, the share price of Samsung Electronics fell only 0.12% to 82,000 won.

Experts advise that buying timing should be considered when large-cap stocks are adjusted due to a surge in long-term interest rates. Although the Fed has not introduced market stabilization measures such as “Operation Twist” (the central bank buys long-term bonds and sells short-term bonds), it is unlikely that it will turn to austerity right away. In February, the US unemployment rate was 6.2%. The US unemployment rate was only 3.5% in February last year, just before the pandemic broke out. It is analyzed that it is difficult to say that the US economy has entered a recovery trend yet. Lee Kyung-min, a researcher at Daishin Securities, said, “Value stocks can give power to the KOSPI in the second quarter of this year, but it will be difficult to establish itself as a leading stock.

The Korean treasury bond market also ended on the 8th with both long and short-term interest rates soaring. The 3-year Treasury Bond interest rate, which is used as a short-term interest rate indicator, rose 7.3bp (1bp=0.01% points) compared to the previous trading day and ended at 1.139%. On this day, the 10-year Korean Treasury Bond interest rate also rose 3.6bp from the previous day to 2.028%. It has been two years since March 2019 that the long-term interest rate has exceeded 2% based on the final bid price.

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