The U.S. Federal Reserve (Fed) has officially ended its four-and-a-half-year tightening cycle by cutting interest rates at the September FOMC meeting. The 50 basis point (bp) cut ("big cut") has sparked uncertainty in global markets, with increased volatility expected in the near term.
As concerns about an economic slowdown persist, investors are likely to adopt a wait-and-see approach until key economic indicators are released at the end of the month.
According to the Korea Exchange on September 19, the KOSPI closed at 2,580.80, up 5.39 points (0.21%) from the previous session.
Although the Fed’s rate cut met market expectations, foreign investors were net sellers, dragging down the KOSPI. Foreign investors offloaded ₩1.1765 trillion worth of shares, marking the largest sell-off since "Black Monday" on August 5.
Semiconductor Stocks Drag Down the Market
Semiconductor stocks, which dominate the Korean stock market, failed to rally. Morgan Stanley sharply cut its price targets for Samsung Electronics and SK Hynix during the Chuseok holiday, further weakening investor sentiment.
SK Hynix’s price target: Slashed from ₩260,000 to ₩120,000 → Stock plunged 6.14%.
Samsung Electronics’ price target: Cut from ₩105,000 to ₩76,000 → Stock fell over 2%.
The KOSDAQ index also saw a rollercoaster session, opening higher, dropping 0.45% intraday, before rebounding 0.86% to close at 739.51.
U.S. Markets React Volatilely to Rate Cut
On September 18 (U.S. time), Wall Street experienced significant swings following the Fed’s rate cut.
Dow Jones: +375.79 points intraday → Closed -103 points (-0.25%) at 41,503.10.
S&P 500 and Nasdaq: Hit new all-time highs intraday → Closed lower.
Investors initially cheered the large rate cut, but sentiment deteriorated on concerns that the Fed was preemptively responding to a potential economic downturn.
Fed Chair Jerome Powell attempted to downplay recession fears, stating that there was no clear evidence of a heightened risk of recession. However, his remarks failed to ease market concerns.
Key Economic Data to Watch
Market participants await key U.S. economic indicators at the end of September, which could determine the market's next direction. If economic slowdown fears resurface, a deeper market decline is possible.
September 23: U.S. S&P Global Manufacturing PMI
September 26: U.S. Q2 GDP
September 27: U.S. August Personal Consumption Expenditures (PCE) Index (Fed’s preferred inflation measure).
Diverging Views: Caution vs. Rebound Potential
Choi Sung-rak, Head of Stock Analysis at the International Finance Center, highlighted recession risks:
"The biggest risk for equity markets is economic slowdown."
"This year’s stock market rally was driven by corporate earnings, making markets more sensitive to recession fears."
"AI and semiconductor stocks have already corrected about 15% from their July highs. If there is no sector rotation into other industries, the broader market could see an extended correction."
Some analysts argue that foreign capital inflows could trigger a sharp rebound.
Bank of America Global Research expects further aggressive rate cuts:
The Fed has two more FOMC meetings scheduled for November and December.
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