It's time now for an in-depth look at the global markets on this Wednesday.
And for that, I'm joined on the line by Dr. Hwang Sei-woon, research fellow at the Korea Capital Market Institute.
Dr. Hwang, thank you for coming on today.
Overnight on Wall Street, stocks were slightly higher. And here in Korea the market's up for a fifth day in a row. What's the story today?
In Wall Street, stocks closed little changed on Tuesday, weighed down by a continuing decline in tech shares while Ford, a U.S. automaker, was pressured by a downgrade to its credit rating. Tuesday’s moves come as value stocks outperformed their growth counterparts for the second straight session. Value’s out-performance over the past two sessions worried investors as a rotation away from growth stocks could lead to a broad-market decline.
Asian stocks edged higher following a late rally in their U.S. counterparts. Shares gained in Japan, South Korea and Hong Kong, though Chinese stocks were little changed. Chinese assets remain in focus after the country removed a foreign investment limit in its capital markets. With investors awaiting the European Central Bank’s policy decision on Thursday and the Federal Reserve’s next week, expectations for more aggressive central bank accommodation increase. Korea’s KOSPI gained 0.48%, Japan’s Nikkei rose 0.45%, and Hong Kong’s Hangseng edged higher 0.15%.
The European Central Bank will be meeting on Thursday. With so much concern about a global slowdown, it seems there's a good chance for an interest rate hike. What do you think they'll do?
Investor focus for now is centered on the European Central Bank’s meeting on Thursday, which is expected to push interest rates even further into negative territory. Investors had bought bonds for many weeks on expectations that the ECB will dole out stimulus, with a cut in interest rates of at least 10 basis points fully priced in. The monetary policy decision by the ECB is important because The ECB could set the tone for upcoming rate-setting decisions by the U.S. Federal Reserve and the Bank of Japan next week, and for the broader global risk appetite.
ECB policy-makers are leaning toward a package that includes a rate cut, a pledge to keep rates low for longer and compensation for banks over the side-effects of negative rates.
On the other hand, concerns have been building that global central banks are reaching the limits of their stimulus options, especially those with negative interest rates and sub-zero long-term sovereign bond yields.
The government's announced support measures worth roughly 6 trillion won to stabilize exports. What are the main industries this will apply to, and what do you think the effects will be?
The government support plan includes implementation strategies for geological diversification and strengthening economic competitiveness of exporting industries. In 2018, major economic blocks such as the U.S., China, Japan and European Union accounted for 53.4% of the annual export of South Korea. Russia and the south east Asian countries’s share was 21%, while the share from the South America, middle East, and Africa was only 9%.
For south east Asian countries, the plan will increase trade insurance supply for 5 most promising consumer products including cosmetics. For Russia, the support focuses on automobile and agricultural machinery. For the developed countries the plan will try to create new momentum by strengthening high-end consumer goods and developing retail relationship through on-line channel. The government plan is expected to reduce risk factors in Korea’s export and enhance the growth potential for the local economy.
Alright, Dr. Hwang. That's where we'll have to leave it for today.
Thanks for coming on, and happy Chuseok to you.