Kospi rises despite Wall Street weakness after Fed rate hike; foreigners sell for sixth straight session as retail buying provides support

An employee works at the dealing room of Hana Bank in Jung-gu, Seoul, as the Kospi opens higher Thursday. [Yonhap]
An employee works at the dealing room of Hana Bank in Jung-gu, Seoul, as the Kospi opens higher Thursday. [Yonhap]

South Korean stocks advanced in early trading Thursday despite a decline on Wall Street the previous session following the US Federal Reserve's benchmark interest rate hike. Foreign investors extended their selling streak to a sixth consecutive session, but retail buying provided enough support to keep the Kospi in positive territory. The index had surged nearly 1 percent right after the open before trimming some of those gains.

As of 9:10 a.m., the Kospi stood at 6,745.53, up 27.56 points, or 0.41 percent, from the previous session. The index had opened up 61.05 points, or 0.91 percent, at 6,779.02. The Kosdaq opened up 4.18 points, or 0.51 percent, at 820.16 and was trading at 822.95, up 6.97 points, or 0.85 percent, at the same time.

On the main Kospi market at that hour, retail investors posted net purchases of 172.8 billion won ($128 million), while institutional investors recorded net selling of 28.4 billion won. Foreign investors continued to offload shares, posting net selling of 203.3 billion won on the main board. After net selling 1.15 trillion won over the five sessions from Sept. 10 through Wednesday, foreigners extended their selling run to six straight sessions, bringing their cumulative net selling to 1.36 trillion won.

Among large-cap stocks, performance was mixed. Samsung Electronics rose 0.59 percent to 255,000 won, while SK hynix fell 0.45 percent to 1.75 million won. Samsung Biologics gained 0.50 percent, KB Financial Group advanced 0.62 percent, and Samsung C&T climbed 1.84 percent. On the downside, Samsung Electronics preferred shares slipped 0.31 percent, LG Energy Solution fell 0.41 percent, and Hyundai Motor edged down 0.14 percent.

Wall Street fell Wednesday (local time) after the Fed raised interest rates and delivered hawkish remarks. The Dow Jones Industrial Average dropped 1.21 percent and the S&P 500 fell 0.45 percent. The tech-heavy NASDAQ also edged down 0.01 percent. Losses were pared in the latter part of the session, however, as buying emerged in semiconductor and other technology shares.

For investors, the key focus from this Federal Open Market Committee meeting was not the rate hike itself but the possibility of further tightening. The Fed raised its benchmark interest rate by 25 basis points Wednesday (local time) to a range of 3.75 to 4.00 percent annually — its first rate increase since July 2023.

The median projection among Fed officials for the policy rate by year-end stood at 4.1 percent, signaling the possibility of one additional hike before the end of the year. Of 18 officials, 16 expected at least one more increase — 12 projected one additional hike and four projected two. Fed Chair Kevin Walsh also indicated that inflation remains elevated and that underlying improvement has yet to become clearly visible.

With the door open to further rate increases this year, markets are expected to watch not only the actual number of hikes but also the trajectory of long-term government bond yields and international oil prices.

"The fact that rates were raised once does not in itself signal a sustained downtrend in equities," said Han Ji-young, a researcher at Kiwoom Securities. "From the stock market's perspective, more weight should be placed on which direction 10-year government bond yields and international oil prices move than on an additional 25-basis-point hike itself."

Han added that market volatility during a rate-hiking cycle reflects both the burden of already-elevated interest rate levels and investors' memories of the sharp equity selloff during the 2022 tightening cycle. "Ultimately, we need to look at both how aggressively monetary policy continues and which direction corporate earnings move," she said.


kacew@heraldcorp.com