By Kim Yoo-chul
Fears of higher interest rates battered Seoul stocks for a second straight session Tuesday following steep falls on Wall Street, analysts said Tuesday.
Traders and investors also changed their view on how many times the U.S. Federal Reserve will raise its key interest rates this year. It is expected to do so four times, which could amount to 1 percent. So far, markets were expecting three rate increases as in 2017.
The Bank of Korea (BOK) said Tuesday that more investment banks were predicting that the Fed will raise its interest rates four times in 2018 to tame growing inflationary pressure.
Seoul stocks extended sharp declines in sync with the US stock market, and increased volatility put even more downward pressure on the KOSPI and Kosdaq indexes.
The Volatility KOSPI, the market's widely followed turbulence gauge, rose by more than 56.16 percent to 25.36 points Tuesday. This was the highest in more than 30 months since Aug. 25, 2015 when the index rose to 31.51.
Analysts say investors need to avoid overreacting as the U.S. stock market will bottom out after recent record falls as growth momentum remains intact.
Seoul stocks closed off their daily lows as institutional and retail investors did bargain-hunting toward the close of the session.
The KOSPI fell 1.54 percent to end at 2,453.31 points. It recovered most of its earlier drops after shedding 3.31 percent to an intraday low of 2,409.38.
The tech-heavy Kosdaq also ended off its lows, as it closed down 0.01 percent to 858.17. At one point, it was down as much as 5.1 percent to hit a daily low of 814.46.
Institutional investors became net buyers from the middle of the session, although foreign investors remained net sellers.
Analysts said investors are overreacting to concerns of higher interest rates and inflation in the United States. They said concerns over flows of funds to bonds following rises in yields of 10-year US treasury bonds were somewhat overblown.
"Central banks are pursuing gradual monetary easing and it's highly unlikely that inflation growth will be steeper than expected," said Kim Jin-young, an analyst at Kium Securities.
Kim still assumes that the latest market tumble in the United States is a "bull market correction."
He said that interest rate hikes are generally an indication that the economy is moving in the right direction.
The BOK said earlier that the country's economic growth rate will top 3 percent this year. It added a reversal of key rates between Korea and the U.S. won't cause heavy capital outflow and the impact of the reversal would be limited.
"The key point is that earnings outlook for global companies is bright and central banks are optimistic about the direction of the global economy. So, it's fair to say that the domestic stock market is experiencing a technical correction. Growth is getting back on track and first quarter earnings will be encouraging," said a hedge fund manager at a U.S.-based investment bank in Seoul.
Fears of higher interest rates battered Seoul stocks for a second straight session Tuesday following steep falls on Wall Street, analysts said Tuesday.
Traders and investors also changed their view on how many times the U.S. Federal Reserve will raise its key interest rates this year. It is expected to do so four times, which could amount to 1 percent. So far, markets were expecting three rate increases as in 2017.
The Bank of Korea (BOK) said Tuesday that more investment banks were predicting that the Fed will raise its interest rates four times in 2018 to tame growing inflationary pressure.
Seoul stocks extended sharp declines in sync with the US stock market, and increased volatility put even more downward pressure on the KOSPI and Kosdaq indexes.
The Volatility KOSPI, the market's widely followed turbulence gauge, rose by more than 56.16 percent to 25.36 points Tuesday. This was the highest in more than 30 months since Aug. 25, 2015 when the index rose to 31.51.
Analysts say investors need to avoid overreacting as the U.S. stock market will bottom out after recent record falls as growth momentum remains intact.
Seoul stocks closed off their daily lows as institutional and retail investors did bargain-hunting toward the close of the session.
The KOSPI fell 1.54 percent to end at 2,453.31 points. It recovered most of its earlier drops after shedding 3.31 percent to an intraday low of 2,409.38.
The tech-heavy Kosdaq also ended off its lows, as it closed down 0.01 percent to 858.17. At one point, it was down as much as 5.1 percent to hit a daily low of 814.46.
Institutional investors became net buyers from the middle of the session, although foreign investors remained net sellers.
Analysts said investors are overreacting to concerns of higher interest rates and inflation in the United States. They said concerns over flows of funds to bonds following rises in yields of 10-year US treasury bonds were somewhat overblown.
"Central banks are pursuing gradual monetary easing and it's highly unlikely that inflation growth will be steeper than expected," said Kim Jin-young, an analyst at Kium Securities.
Kim still assumes that the latest market tumble in the United States is a "bull market correction."
He said that interest rate hikes are generally an indication that the economy is moving in the right direction.
The BOK said earlier that the country's economic growth rate will top 3 percent this year. It added a reversal of key rates between Korea and the U.S. won't cause heavy capital outflow and the impact of the reversal would be limited.
"The key point is that earnings outlook for global companies is bright and central banks are optimistic about the direction of the global economy. So, it's fair to say that the domestic stock market is experiencing a technical correction. Growth is getting back on track and first quarter earnings will be encouraging," said a hedge fund manager at a U.S.-based investment bank in Seoul.
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