[이데일리 양지윤 기자] Volatility in the Korean stock market is increasing amid ongoing global financial market unrest due to concerns about chain defaults by global banks. It is interpreted that the US Federal Reserve System (Fed · Fed) has entered the market to notice as the sense of wariness grows ahead of the regular meeting of the Federal Open Market Committee (FOMC) in March. The Fed is expected to continue raising interest rates despite the turmoil in the banking sector. Despite the role of firefighters by large global banks and governments, the market for volatility is expected to continue for the time being as anxiety over the financial crisis is not going away easily.
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KOSPI, ‘sell’ in 2 trading days to foreigners due to continued wariness
According to Market Point on the 20th, the KOSPI index closed at 2379.20, down 16.49 points (0.69%) from the previous trading day.
The index, which started off weakly, broke through the 2400 line at one time in the morning. However, he fluctuated due to the selling price of foreigners and increased his decline in the afternoon. The aftershock of Credit Suisse (CS), which is being acquired by Switzerland’s largest bank UBS, seems to have stimulated risky asset aversion as volatility in the foreign exchange and bond markets increased. The Swiss Financial Supervisory Service announced on the 19th (local time) that it had written off all of CS’ bonds worth 16 billion Swiss francs (about $ 17.3 billion, about 22.47 trillion won) of hybrid capital securities (CoCo bond, AT1). CS’s AT1 was accounted for as a loss, and the bond value became virtually zero. Although concerns over systemic risks in the banking sector have subsided, it is analyzed that the Swiss financial authorities’ solution has increased uncertainty related to AT1 and led to increased volatility in the financial market.
Foreigners switched to ‘sell’ in two trading days and sold 205.9 billion won. The net sales amount is the fourth largest this month, following the 9th (972.1 billion won), 14th (638.4 billion won), and 10th (325.8 billion won). On the other hand, institutions net bought 106.8 billion won and individuals net bought 88.6 billion won, but it was not enough to prevent the index decline.
Baby step advantage… “The Fed’s view of the banking crisis is also a point to watch”
The stock market is expected to remain volatile for the time being. Amid the aftershocks of the US Silicon Valley Bank (SVB) and CS crisis, a sense of caution about the FOMC to be held this week is mixed, and extreme attention is expected to unfold. The Fed will decide the level of interest rate hike at the FOMC meeting on the 21st and 22nd. The March FOMC results will be released at 3:00 a.m. on the 23rd, Korean time.
Despite the chaos in the banking sector, the prevailing view is that interest rates will continue to be raised to control inflation. The rate hike is expected to be 0.25 percentage point, lower than the original 0.5 percentage point. According to the Chicago Mercantile Exchange (CME) FedWatch as of the 18th, the probability of a 0.25 percentage point rate hike at this meeting was 62% and the probability of a rate freeze was 38%, respectively. Bank of America (BofA) and JP Morgan expected the Fed to raise interest rates by 0.25 percentage points, and Goldman Sachs predicted the possibility of a freeze.
The stock market judged that stock price volatility could increase due to deteriorating investor sentiment after the FOMC.
Lee Kyung-min, a researcher at Daishin Securities, said, “In a situation where signs of market cracks due to monetary tightening are visible, a 25bp (1bp = 0.01% point) increase will have a limited impact on the global financial market.” It will have a negative impact on investor sentiment, which expected a change in monetary policy while recognizing the two-track strategy, which is highly likely to freeze interest rates,” he predicted.
Han Ji-young, a researcher at Kiwoom Securities, said, “In the Chicago Mercantile Exchange (CME) Fed Watch, which market participants refer to when betting on FOMC, the probability of a 25bp hike is 62%, which is more likely than the 38% freeze. It is a problem that the FOMC interest rate decision outlook changes frequently and creates noise,” he said, concerned about the increase in volatility in the financial market. “In addition to the interest rate decision, checking the Fed’s view on the banking crisis caused by the SVB is another point to watch at this FOMC,” he said. We should also pay attention to Chairman Jerome Powell’s related comments in that this can be modified.”