증시 대담
It's time now for a look at the market action here in Korea and around the world.
And for that we're joined on the line by Mr. Daniel Yoo, Global Strategist at Kiwoom Securities. Mr. Yoo, thank you for coming on.
You're welcome.
So, we heard just now that the Fed kept interest rates where they are, not seeing a need right now for a shift in policy.
What was the reasoning at the Fed, and how have the markets reacted?
Current inflation rate only 1.9%. Core personal consumption expenditure price index is only up 1.6% (Target 2%).
However, economic growth rate remains strong showing 3.2% growth YoY in first Q.
Federal Reserve officials voted to hold interest rates steady Wednesday, while Fed Chairman Jerome Powell said in a news conference that recent low inflationary pressures may only be "transitory. " That dashed speculation the central bank was entertaining the idea of a rate cut because of tame inflation.
Upon the news, US dollar strengthened, rate rose from 2.44% to 2.5%, and market showed correction
We need additional catalyst for the market to go up higher.
1) Rate cut, 2) trade negotiation settlement, 3) OECD economic leading indicator turning around.
Here in Korea, the KOSPI started out a little weak but shot right up after the Fed's announcement. What in addition to the Fed was behind today's rise?
Korea's worst is over we believe. GDP falling -0.3% QoQ in first quarter was that main concern. However, Korea business confidence indicator rising to 75 in April for 73 in previous month. Industrial production rose 1.1%, retail sales up 3.3% and facility investment sharply rose 10%. Export also declined by 2.0%, but less than 5% decline estimates. Dram price decline affecting negatively, but 2H turnaround is likely.
This on top of cheapest valuation of KOSPI making the market looking attractive despite US rate decision and weak economic growth in 1Q2019.
The Korean won has been weakening this year against the dollar in a pretty big way. But today that turned around slightly. What's happening with the exchange rate?
Clearly, weak economic growth - won weakness.
Potential for rate cut is in the picture.
Also, due to export skewedness, fall exchange rate is good for exporters. Rumor of contract price for SK Hynix and various other export companies affected the exchange rate at the end of the month in April settling at 1168 Won dollar rate. Today, it has gone down to 1164.20. In the long run we expect won to appreciate to previous average of 1120 won level. However, in the short term volatility remains.
Okay, Mr. Yoo. That's where we'll leave it today.
Thanks for your analysis, as always.
We appreciate it.
