Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Risky assets regaining hopes for year-end rally as Biden pledges no lockdowns
An electronic board set up in a dealing room at Hana Bank's headquarters in Seoul shows a gain of the benchmark KOSPI and a won-dollar exchange rate loss on Wednesday morning. Yonhap
By Lee Min-hyung
By Lee Min-hyung
The Korean stock market will regain confidence from investors on hopes for a year-end rally, after U.S. President Joe Biden pledged not to introduce additional lockdown measures despite growing fears over the Omicron variant of COVID-19 here and abroad, experts said Wednesday.
Investor preference for safe assets had been prevalent in recent weeks, as was shown by a surge in the won-dollar exchange rate and fluctuating stock indices here. But market analysts expected the benchmark KOSPI and the Korean currency to be able to recover their valuation to some extent, amid reviving confidence in risky assets.
The analysis came in response to Biden's latest remark that the world's largest economy does not have plans to “include shutdowns or lockdowns” to fight the coronavirus and its variants.
This pushed the main bourse higher with a gain of 18.47 points, or 0.62 percent, to 2,993.5 points at the opening of the market, Wednesday. The won-dollar exchange rate also started with a loss of 1.9 won at 1,191 won per dollar.
The exchange rate had particularly been on a steep rise since early this month, when fears of Omicron started escalating across the global asset market. The KOSPI also failed to achieve a major rebound earlier this month, repeating unstable ups and downs at around the symbolic 3,000-point mark.
The prevailing view is that the preference for risky assets will not be long-lasting, as the U.S. Federal Reserve is scheduled to put an end to its years-long freeze of its near-zero key rate policy, possibly as early as May 2022. The Fed already reiterated its plan to finish tapering bond purchases by the end of March next year to bring inflationary pressure under control.
The Bank of Korea (BOK) also carried out its preemptive key rate hikes this year and plans to do so once more by the end of the first quarter of next year to 1.25 percent. This also comes as another fear factor for Korean stock markets.
But analysts said the Fed would not push for an unexpectedly steep set of rate hikes next year.
“The Fed is expected to increase its benchmark rate twice, respectively, in 2022 and 2023, and its key rate is unlikely to be raised to a contractionary level,” Meritz Securities analyst Lee Seung-hoon said. “This means investors can continue to make gains from risky assets for the time being.”
BOK Governor Lee Ju-yeol also predicted the Fed's policy shift would have limited impact on the local financial market, as has been widely expected.
“The Fed already hinted at the rate hikes, but financial markets here and abroad have shown little sign of fluctuation and are on track for stability,” Lee told reporters during an online press conference last week.
“If the Fed does not make any drastic changes to its monetary policy, this will not have any serious influence on the Korean financial market,” he said.