Korean stocks regain vigor on rate freeze, US inflation slowdown
Dealers at Hana Bank work at its office in Seoul in this file photo. Yonhap
By Lee Min-hyung
Korean stocks extended a rally, Thursday, following overnight gains on Wall Street lifted by data showing a slowdown in U.S. inflation. The benchmark KOSPI was also buoyed by the Bank of Korea's (BOK) widely-expected decision of a rate freeze.
The macroeconomic data helped the main bourse return to the 2,600-point mark during morning trade. The KOSPI closed up 0.64 percent at 2,591.23 powered by a buying spree by foreign and institutional investors, according to data from the Korea Exchange. The secondary Kosdaq also displayed a more powerful rally, closing at 893.07, up 1.5 percent from a day earlier.
Korean stocks displayed weak performance in recent weeks amid foreign exodus. But market sentiment is showing signs of recovery after U.S. inflation fell to a two-year low of 3 percent in June.
Local shares also achieved a relief rally after the BOK froze its key interest rate. Even if the central bank left open the possibility of additional rate hikes, investors are showing a tendency to bet more on possible rate cuts amid slowing consumer price rise.
Analysts said the market circumstance is forecast to remain favorable to investors until the U.S. Fed's next monetary decision scheduled for two days from July 25.
“Growth stocks ― which were vulnerable to the global rate hike ― will pick up momentum for recovery after concerns over monetary tightening have been alleviated from the market,” Han Ji-young, an analyst at Kiwoom Securities, said.
Most large-cap stocks displayed a decent rally on the same day. Shares of Samsung Electronics, the most valuable firm by market capitalization here, edged up during the trading hours, but closed with no change from a day earlier. LG Energy Solution shares extended a bigger gain of 1.5 percent.
Other blue-chip tech and bio shares also surprised investors with a more solid rally. Shares of Samsung SDI soared by 3.77 percent. Celltrion also closed up more than 2 percent.
Even if institutional investors drove the stock gains, it remains to be seen whether foreign investors return to the KOSPI following the Fed's possible upcoming rate hike. The interest rate gap between Korea and the U.S. widened to a historic high of 1.75 percentage points, but the figure is widely forecast to rise to 2 percentage points by the end of this month.
This amplifies the possibility of foreign capital outflow. Foreigners changed their position on the local stock market in June by dumping local shares for the first time in three months.