the Bank of Korea's monetary policy committee (Monetary Policy Board) carried out a second straight base rate hike, returning to the "3% range era" for the first time in 1 year and 9 months. The securities industry said that because this rate increase was not priced in, short-term market volatility will expand and a market of "separating the wheat from the chaff" will emerge.
On the 27th, the Monetary Policy Board held a meeting to set the direction of currency policy and raised the base rate by 0.25 percentage points, from 2.75% to 3.00%. It is the second consecutive monthly hike after last month.
Initially, in the financial investment industry, the dominant view was that the BOK would pause (hold) at the August Monetary Policy Board after the July hike and only consider another increase in October. However, as the BOK raised this year's growth forecast from 2.6% to 3.3% and decided on consecutive hikes, citing strong core inflation and the need to respond to household debt and exchange rate volatility, concerns about prolonged tightening spread in the market.
That day, the domestic stock market wavered, quickly giving back intraday gains and deepening losses right after news of the Monetary Policy Board's hike. The KOSPI, boosted by Nvidia's strong earnings, jumped 2.76% early in the session, nearing the 7,000 level, but after the rate hike announcement, the gain at one point narrowed to around 0.5%. Still, as buying flowed into semiconductors and secondary batteries, it closed at 6,912.27, up 1.53% from the previous trading day.
◇ Securities industry: "Paradigm shift from liquidity-driven to earnings-driven market"
In the securities industry, the Bank of Korea (BOK)'s hawkish (favoring monetary tightening) stance combined with caution over the U.S. Federal Reserve's tightening is expected to cap the market's upside for the time being.
Lee Kyung-min, a researcher at Daishin Securities, said, "The 25-basis-point (1 bp = 0.01 percentage point) hike at the August Monetary Policy Board further stoked market caution," adding, "Despite relief from the U.S. PCE inflation release and Nvidia's solid results, the market is waiting for the Jackson Hole meeting and remains wary of the Fed's tightening stance, limiting further upside momentum."
However, experts see the additional downside in the indexes from this hike as limited. That is because the monetary authorities' justification for tightening is to curb overheating based on strong growth rather than a recession.
Lee Jae-won, a researcher at Yuanta Securities Korea, said, "Although the Monetary Policy Board raised the base rate consecutively, the burden of additional tightening is limited," analyzing that "ultimately, the market has a structure where long-term rates cap the upside while earnings, shareholder returns, and treasury stock supply and demand support the downside."
The analysis is that successive rate hikes could serve as a catalyst to maximize a differentiated market between sectors and stocks rather than breaking the broader upward trend of the entire market.
Researcher Lee Jae-won said, "As much of the uncertainty from short-term events has been resolved, the pullback in large-cap semiconductors should still be viewed as a buying opportunity on dips," adding, "Outside IT, shipbuilding and insurance, which have lagged in relative returns versus earnings estimates, can be alternatives, and expectations of indirect benefits from the U.S. apply not only to power equipment and ESS (energy storage systems) but also to shipbuilding."
On the other hand, caution was advised regarding the KOSDAQ market and high-valuation growth stocks.
The researcher said, "On KOSDAQ, rotational trading among sectors is active, but the sustainability of leading sectors is low," advising, "In a base rate hiking phase, high-valuation growth stocks can remain relatively weak, so instead of chasing the index, investors should focus on stocks with confirmed earnings and supply-demand."
There is also an outlook that, rather than a sharp V-shaped rebound, the market will continue a gentle, differentiated phase centered on leaders with clear earnings momentum.
An official at a domestic asset management firm said, "In the early stages of rate hikes, investor sentiment may be somewhat dampened, but this increase could serve as a signal of a paradigm shift from a liquidity-driven market to a full-fledged earnings-driven market," adding, "Fund flows will be reallocated toward leaders with clear earnings momentum in the third quarter of this year and strong valuation appeal."