The Korean stock market has experienced a significant decline following the hawkish Senate testimony of US Federal Reserve Chairman Powell. The KOSPI closed at -1.28%, while the KOSDAQ closed at - 0.22%. Powell's remarks indicated that the current interest rate level could be higher, and the pace of interest rate hikes could increase based on data. This news was disappointing for equity investors who had been relieved to see the rate hike lowered to 25 basis points in 2023.
The stock market's reaction to Powell's comments was overwhelmingly bearish, with decliners accounting for more than 70% of traded stocks. While the highest market capitalization stocks limited further losses, it was disappointing to see that the gains were limited to only a few stocks.
According to market analysts, Investors are expected to remain on the sidelines until the FOMC meeting. The interpretation of each piece of data that is released and the high volatility that comes with it will only increase the difficulty for equity investors. Several events to watch this week include February Non-Farm Payrolls, CPI, and Retail Sales.
The KOSPI is still trading sideways in the 2,400-2,500-point range after entering the 2,400-point range about a month ago. The downside is more likely than the upside in the current situation due to several factors, including the dollar-won exchange rate, which has become unaffordable for foreigners, weakening foreign demand, declining earnings estimates, rising stock prices, and a high amount of credit outstanding, which is short-term in nature.
Global Asset Research team at Hana Securities predicts, to win in the market, profit is essential, but the presence or absence of balance is the condition to participate. It would be a good strategy for investors to close positions and take a break while the market is experiencing more bad news than good.
