"Why Did the KOSPI Plunge Despite the Rate Freeze?"

[Anchor]

The Bank of Korea, which raised benchmark interest rates consecutively in July and August, has opted for a freeze this time. However, as it strongly signaled the possibility of future hikes, combined with concerns over the profitability of AI investments, the KOSPI plummeted by more than 3.5%.

Here is a report from reporter Kim Hye-min.

[Reporter]

As widely expected by the market, the Bank of Korea left its benchmark interest rate unchanged at 3.0 percent.

All seven members of the Monetary Policy Board voted in favor of the freeze.

Previously, the board cut rates four times from October 2024 to May of last year, before raising them back-to-back in July and August.

Bank of Korea Governor Shin Hyun-song emphasized preemptive action during the August rate hike by stating, "We blocked with a hoe what could have required a shovel," and explained today (the 22nd) that "this freeze is the fruit of that hoe-working."

He stated that the bank has gained maneuvering room to conduct monetary policy tailored to domestic economic conditions without being rushed by external circumstances.

However, he also hinted at the possibility of additional rate hikes coming up in November or early next year.

[Shin Hyun-song / Bank of Korea Governor : Because growth and inflation pressures are showing even stronger aspects than they did in August, I believe it is necessary to continue our current restrictive policy stance.]

The KOSPI experienced a sharp decline due to forecasts that the tightening cycle will continue, along with growing questions over AI profitability.

With Samsung Electronics dropping 4 percent and SK Hynix falling 5.8 percent, the index closed down 3.52 percent from the previous day at 5,533.

Technology shares across Asian markets weakened following news that Meta released its third-quarter earnings without providing an investment outlook for next year, and the market was also weighed down by profit-taking following yesterday's surge of over 5 percent.

[Lee Jin-woo / Head of Research, Meritz Securities : There were sharp declines led by the Hang Seng Tech index and others. Our market moved in tandem and showed a downward trend as well. Because our market has an exceptionally large weight in semiconductors and the influence of foreign capital flows has become much higher than before, it had the effect of making the shock to the market appear larger.]

Upcoming earnings reports from Microsoft and Amazon next week, along with detailed shareholder return plans from SK Hynix and Samsung Electronics, are expected to serve as short-term inflection points.

(Video by Shin Jin-soo | Video Editing by Ahn Yeo-jin | Graphics by Park Tae-young)
※ Please note: This article was translated by AI and may contain errors.