In-depth: Korean stocks
- 5 years ago
증시 전화 연결
Monday, we started the week with the KOSPI down big time. That was because of fears of a slowdown or even a recession down the road. But today it ticked up.
We're joined now by Global Strategist Daniel Yoo of Kiwoom Securities to help us sort through it all.
Mr. Yoo, take us through today's trade.
The Kospi declined sharply on Monday by 1.92%, and Kosdaq also fell by 2.25%
Today, Kospi …. Kosdaq….
It seems the market is stabilizing as the US market did on Monday after Friday’s sharp drop.
A major concern is whether the global economy is going to fall into recession.
The rate differential on 3 month and 10 year bonds turned negative. Currently 3 months US government bond rate is at 2.447% and 10 year government bond rate is at 2.405%. The short-term rate is higher, meaning an inverse yield curve.
Now, today we had Samsung Electronics saying it thinks its earnings for the first quarter are going to be below market expectations. Samsung shares down a bit today.
Shares in Europe and America were also hit hard at the end of last week because of similar concerns over a slowdown. How did those markets start the new week?
European markets showed a slight decline, with Germany’s DAX index down 0.15%, France’s CAC index down 0.18%, Euro Stoxx 50 down 0.16%, and Italy down 0.09%.
The US markets were basically flat on Monday. The Dow was up slightly by 0.06%, S&P500 down 0.08%, Nasdaq down 0.07%, while smallcap 2000 was up 0.01%.
Recession worries seem to have eased because the US Fed currently has room to boost the economy. Ex-Fed Chair Yellen said that an inverse yield curve is not a sign of US recession, a view I strongly agree with.
As you say, the Fed has backed off interest rates for this year. It's interesting that you agree with Yellen that the inverted yield curve is overblown. Why is that, and what other factor should be be looking at?
When the yield curve inverts, it might be a sign of recession. However, we have to look at the loan-to-deposit ratio. When the yield curve inverts, banks might not lend more due to worries of net interest margin decline. However, if the LTD is low, banks can lend more allowing margin to expand. Therefore, we expect an economic slowdown will not lead to economic recession.
Alright, Mr. Yoo, we'll have to leave it there.
Thank you.
Daniel Yoo of Kiwoom Securities with our market wrap up.
Monday, we started the week with the KOSPI down big time. That was because of fears of a slowdown or even a recession down the road. But today it ticked up.
We're joined now by Global Strategist Daniel Yoo of Kiwoom Securities to help us sort through it all.
Mr. Yoo, take us through today's trade.
The Kospi declined sharply on Monday by 1.92%, and Kosdaq also fell by 2.25%
Today, Kospi …. Kosdaq….
It seems the market is stabilizing as the US market did on Monday after Friday’s sharp drop.
A major concern is whether the global economy is going to fall into recession.
The rate differential on 3 month and 10 year bonds turned negative. Currently 3 months US government bond rate is at 2.447% and 10 year government bond rate is at 2.405%. The short-term rate is higher, meaning an inverse yield curve.
Now, today we had Samsung Electronics saying it thinks its earnings for the first quarter are going to be below market expectations. Samsung shares down a bit today.
Shares in Europe and America were also hit hard at the end of last week because of similar concerns over a slowdown. How did those markets start the new week?
European markets showed a slight decline, with Germany’s DAX index down 0.15%, France’s CAC index down 0.18%, Euro Stoxx 50 down 0.16%, and Italy down 0.09%.
The US markets were basically flat on Monday. The Dow was up slightly by 0.06%, S&P500 down 0.08%, Nasdaq down 0.07%, while smallcap 2000 was up 0.01%.
Recession worries seem to have eased because the US Fed currently has room to boost the economy. Ex-Fed Chair Yellen said that an inverse yield curve is not a sign of US recession, a view I strongly agree with.
As you say, the Fed has backed off interest rates for this year. It's interesting that you agree with Yellen that the inverted yield curve is overblown. Why is that, and what other factor should be be looking at?
When the yield curve inverts, it might be a sign of recession. However, we have to look at the loan-to-deposit ratio. When the yield curve inverts, banks might not lend more due to worries of net interest margin decline. However, if the LTD is low, banks can lend more allowing margin to expand. Therefore, we expect an economic slowdown will not lead to economic recession.
Alright, Mr. Yoo, we'll have to leave it there.
Thank you.
Daniel Yoo of Kiwoom Securities with our market wrap up.