The fateful FOMC is about to happen… Roller coaster beware KOSPI

[이데일리 양지윤 기자] Volatility in the Korean stock market is increasing amid continued global financial market turmoil due to concerns about chain defaults by global banks. It is interpreted that the United States Federal Reserve System (Fed·Fed) entered the market to observe as the sense of vigilance grew before 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 fire extinguishers by major global banks and governments, the market for volatility is expected to continue for now as concern about the financial crisis does not go away easily.

KOSPI, ‘sold’ in 2 trading days to foreigners due to continued vigilance

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 with a weak consensus, broke through the 2400 line at one point in the morning. However, it fluctuated due to the selling price of foreigners and the discount increased in the afternoon. The aftershock of Credit Suisse (CS) being acquired by Switzerland’s biggest bank, UBS, appears to have fueled risk-averse sentiment 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 CS bonds worth 16 billion Swiss francs (about $17.3 billion, about 22.47 trillion won) of hybrid capital securities (CoCo bond, AT1). AT1 CS was accounted for as a loss, and the value of the bond became almost zero. Although concerns about systemic risks in the banking sector have subsided, it is analyzed that the solution of the Swiss monetary authorities has increased uncertainty related to AT1 and led to more instability in the financial market.

Foreigners changed 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, net organizations bought 106,800,000 won and net individuals bought 88.6 billion won, but it was not enough to stop 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 now. Amid the aftermath of the US Silicon Valley Bank (SVB) and CS crisis, a sense of caution surrounding this week’s FOMC meeting is mixed, with extreme coverage expected to develop. The Fed will decide on the level of interest rate increases at the FOMC meeting on the 21st and 22nd. The March FOMC results will be released at 3 am on the 23rd, Korea time.

Despite the chaos in the banking sector, the general view is that interest rates will continue to be raised to control inflation. The rate rise is expected to be 0.25 percentage points, down from the original 0.5 percentage point. According to the Chicago Mercantile Exchange (CME) FedWatch from the 18th, the probability of a rate hike of 0.25 percentage points 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 opined that stock price volatility may increase due to declining investor sentiment after the FOMC.

Lee Kyung-min, a researcher at Daishin Securities, said, “In a situation where signs of cracks in the market due to monetary tightening are visible, an increase of 25bp (1bp = 0.01% point) will have a limited impact on the global financial market . ” It will have a negative impact on the sentiments of investors, who expected a change in monetary policy while recognizing the two-track strategy, which is very likely to freeze interest rates,” he predicted.

Han Ji-young, 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. “In addition to the interest rate decision, checking the Fed’s view on the banking crisis caused by the GMB is another point to watch at this FOMC,” he said. modified.”