4.25% Interest Rate Scenario and Market Response

Park Byeong-chang, CEO of MP Partners, presented a KOSPI target index of 7,500, analyzing that at this index level, Samsung Electronics would be between 290,000 and 300,000 won, and SK Hynix between 1,950,000 and 2,000,000 won.

He recommended responding by selling when approaching this range, emphasizing the importance of proactively establishing market strategies.

Unexpected remarks at last week's Jackson Hole meeting led to a downward revision of market forecasts. CEO Park mentioned that if those remarks hadn't been made, the market would have attempted another rally.

Accordingly, the September index target was adjusted to around 7,000-7,100, emphasizing that risk management is essential in preparation for uncertainty.

The US 10-year Treasury yield recorded 4.81%, raising the possibility of aggressive forces in the bond market. With current rates climbing to 4.85%, concerns about reaching 5% are growing.

CEO Park mentioned that if it goes above 4.8%, there will clearly be forces pushing it in that direction, warning that reaching 5% could pose significant risks to the market.

This suggests the possibility that a specific market force is driving interest rate hikes, beyond simple rate increases.

The rise in US bond yields is perceived as a national risk, and it is expected that the US administration, Treasury Secretary, or the Fed will not stand idly by. CEO Park anticipates that government authorities will take action to curb rising interest rates against these aggressive forces.

Depending on the intensity of such policy measures, the possibility of a market rebound could open up, and market attention is focused on the government's future response.

Global inflation is attributed to large-scale liquidity injections by governments worldwide and the devaluation of currencies. Physical conflicts such as wars further exacerbate price increases.

Due to these complex factors, concerns about stagflation are growing, posing a serious challenge to the global economy.

The stock market does not reflect the past but only the future. Therefore, if the current market is sufficiently reflecting risks, a strong rebound could occur when the situation stabilizes.

However, if the market fails to adequately reflect these risks, there is always a danger of an unexpected sharp decline, or 'tantrum'.

The simplest criterion for judging market trends is whether 'money is flowing out of the market, or if more is being released'. CEO Park analyzed that money is still being released based on US M2 data.

This means that government fiscal spending is acting as an important factor in defending against market decline, suggesting that liquidity is a crucial support for the market.

In the domestic stock market, customer deposits sharply decreased from 130 trillion won to 99 trillion won, falling below 100 trillion won. In contrast, margin loans fell below 30 trillion won before rebounding.

This decrease in customer deposits clearly shows that capital is leaving the stock market, which is analyzed as a primary cause of market contraction.

External shocks like war or earthquakes can present buying opportunities, but market declines due to macro issues like economy or interest rates require active 대응 rather than simply buying, CEO Park advises.

The current market is at a critical juncture for responding to macro variables, and investors must formulate strategies accordingly, he emphasized.

Interest rates act as a risk-free return, becoming a crucial investment decision factor when compared to the expected return from the stock market. When risk-free returns rise, the attractiveness of stock investments decreases.

Currently, the attractiveness of savings and deposit interest rates is increasing compared to pension funds' target returns, strengthening the preference for safe assets.

This accelerates the outflow from risky stock investments and can act as a structural problem that shrinks market liquidity.

While concerns about a domino effect of corporate bond defaults due to US base rate hikes are raised, CEO Park warns against such excessive worry. He explained that similar concerns existed in the past, but the market often overcame them.

Especially for large big tech companies, the possibility of 'too big to fail' is high, so he added that investors should guard against panic selling driven by excessive fear.

If the US base rate reaches 4.25%, mortgage rates for real estate are projected to rise to 8-9%. This will directly impact corporate bond issuance rates, significantly increasing the burden of corporate fundraising.

High interest burdens particularly increase the risk of default for small and medium-sized enterprises and can act as a factor that tightens overall market liquidity.

CEO Park emphasizes that analyzing and responding to market conditions on a quarterly basis is a crucial role for investors. While this quarter is also challenging, he states that selling everything in preparation for a crash next year based on immediate difficulties is premature.

The market is an area of response rather than prediction, and a strategy that flexibly copes with current uncertainties is necessary, he asserted.

Risky market situations can actually become opportunities for significant profits. CEO Park emphasized that investors should view the current difficult situation as 'another opportunity coming my way'.

Nationally led policies such as the AI cycle and power infrastructure remain valid investment themes.

Successful asset owners made significant profits through bold investments when the market was highly risky, and he explained that this is a matter of mindset.

Investors should have a positive mindset, finding and utilizing new opportunities, rather than being caught up in pessimistic outlooks.