Korean stocks still vulnerable to Fed's future policy tightening

• Published date: 10 March 2023
• Publication title: The Korea Times

The Korean stock market is expected to display increased volatility until the U.S. Federal Reserve's upcoming rate-setting meeting slated for two days from March 21, according to market analysts Friday.

The outlook comes as the benchmark KOSPI fell below the psychologically-important 2,400-point level after foreign and institutional investors went on a selling spree. The won is also weakening against the U.S. dollar, with Korea's current account setting a record deficit in January.

The Korean stock market tumbled Friday by more than 1 percent, hit by overnight declines of major U.S. stock indices amid prevailing concerns over the Fed's hawkish rhetoric. The Nasdaq fell Thursday by 2.05 percent, while the S and P500 slipped 1.85 percent.

The main KOSPI bourse closed at 2,394.59, down 1.01 percent from the previous session. The secondary Kosdaq also closed with a bigger loss of 2.55 percent during the same period.

"The future movement of the main bourse will be determined by how hawkish the Fed's willingness for monetary tightening will be," Kim Sung-hwan, an analyst at Shinhan Securities, said.

He also left open the possibility of the KOSPI's estimated upper limit rising higher than its earlier forecast if the Fed does not show any surprisingly hawkish rhetoric during the Federal Open Market Committee meeting.

The won-dollar exchange rate also soared to a new high this year on the same day. The depreciation of the Korean won was attributable to escalating uncertainties over U.S. jobs data to be released Friday afternoon.

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