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| Dealers are seen in front of a screen displaying the KOSPI's closing price at a dealing room in Hana Bank, Seoul, Monday. The KOSPI closed at 3,249.30. Yonhap |
By Kim Yoo-chul
The South Korean stock market is set to continue its strong moves as far weaker-than-expected U.S. job growth data could overshadow debate over interest rates.
The local stock market, the bourse of which is moving in tandem with U.S. equity markets, is worried about recent remarks by U.S. Treasury Secretary Janet Yellen as she said a rate hike may be needed to stop the world's largest economy from overheating.
While a few hours, Yellen was in a hurry to downplay her remarks after they resulted in a big sell-off in technology stocks and pushed long-term treasury note yields higher. Plus, analysts say the stock market is viewing the recent U.S. labor market data, which just added 266,000 jobs last month, as a positive factor for the stock market.
"Despite Yellen's denial for the significance of her rate hike remarks, markets understood the comments as an excuse for profit-taking. But the recently released U.S. job data is also being used as an excuse for the lack of any heated debate over rate hikes in the United States. The Korean stock market will see a boost until the end of the third quarter. Stronger second-quarter earnings by blue-chip firms are also set to back up the bullish moves," a senior fund manager at a U.S.-based investment bank's Seoul office said by telephone, Monday.
According to the manager, who invested a "few million dollars" in major tech stocks on both the KOSPI and Kosdaq, said an expected "mild job addition" curve in the United States in the following months will keep the Federal Reserve's "accommodative easing policy" working by the first half of next year with Washington's economic policymakers putting more focus on liquidity pumping over possible tapering.
Park O-ki, IBK Securities' head of investment strategy, said that share prices, which have been rising over the past few months, will rise with battery and tech stocks leading the way thanks to a gradual and steady bounce-back of activity in developed nations where vaccination programs are far advanced.
"We are not ruling out the possibility that the local equity market will see corrections. However, the corrections will be mostly because of short-term profit-taking by investors. As more vaccines will roll out, if a resurgence of COVID-19 comes up, its effects will be limited. A series of stimulus by central banks will be applied and that could lead to rising inflation. However, the intensity isn't that strong," another fund manager at a local bank said on condition of anonymity, as he isn't officially tasked to speak to the media.
The Bank of Korea's (BOK) benchmark rate is 0.5 percent, a record low. Recently released minutes for the specifics discussed during last month's BOK monetary policy meeting showed policymakers said the bank needed to explore the best possible ways for how to maintain financial stability.
On Monday, the KOSPI rose 1.63 percent to 3,249.30 points, while the tech-savvy Kosdaq advanced 1.48 percent at 992.80, according to data by Korea Exchange, the bourse operator.
