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| An electronic board, set up at a dealing room of Hana Bank's headquarters in Seoul, shows the closing price of the benchmark KOPSI on Friday. Yonhap |
By Lee Min-hyung
The benchmark KOSPI will continue its momentum for a rally and attain the 2,500-point mark this week on additional foreign capital inflow, which is being driven by hopes of the U.S. Fed slowing down its rate hike pace during its upcoming rate-setting meeting, analysts said.
The main bourse closed at 2,484.02 on Friday, up 11 percent from the end of 2022. This is the largest monthly growth since November 2020 when the figure reached 14.29 percent.
The bullish sentiment is forecast to remain in place for the next few trading days, as the market consensus is that the Fed has come closer to its year-long rate hike cycle. The Federal Open Market Committee (FOMC) meeting is scheduled for two days from Jan. 31 when the authority is expected to take the baby step of increasing its key rate by 25 basis points.
The Fed is diminishing its hawkish rhetoric since December when it started slowing down the pace of its rate hikes. Starting from June 2022, the Fed pushed for four consecutive giant rate hikes of 75 basis points, however, it then ended up taking a big rate hike of 50 basis points in December.
This comes as an impetus for foreign investors to increase their investment here. According to data from the Korea Exchange, foreigners purchased local stocks worth 6.8 trillion won this year alone, and the portion of foreign-owned stock holdings in the KOSPI also rose to 31.85 percent as of the last trading day.
The faster-than-expected alleviation regarding the monetary risk factors has propelled the solid rally of the local stock market, analysts said. China's economic reopening also comes as a boon for the local stock market.
"The key reason behind the strong buying spree by foreigners of local shares is because risk factors ― surrounding the Fed's rate hike cycle and China's economic slowdown ― are being rapidly cleared away," Hi Investment & Securities analyst Park Sang-hyun said. "The sharp depreciation of the dollar against the Korean won is also stimulating foreign capital inflow here."
