Diverging rate policies, AI competitiveness create widening gap between both countries
By Yi Whan-woo
Although the Korean stock market has been retreating this year, the U.S. stock market has been rallying, largely due to differing monetary policies and competitiveness in the rapidly growing artificial intelligence (AI) sector, analysts noted on Monday.
Analysts believe that the U.S. presidential election scheduled for Nov. 5 could exacerbate the decoupling of the Korean and U.S. stock markets, potentially causing the sluggish Seoul bourse to decline further.
“The Korea-U.S. mismatch in equity price movements occurred in the past, but this year’s decoupling seems trickier to resolve due to the differing rate policies,” said Woo Seok-jin, an economics professor at Myongji University.
The professor noted that the benchmark KOSPI, which has dropped 2.84 percent this year as of Friday, is among the worst-performing markets among major economies.
In particular, it has mostly stayed within the range of 2,500 to 2,700 points since August, after nearly reaching 2,900 points in July.
In stark contrast, the U.S. stock market has seen significant gains, with the Dow Jones Industrial Average marking its sixth consecutive weekly advance and reaching an all-time high of 43,239.05 on Friday.
Given the circumstances, the Bank of Korea (BOK) adopted a less dovish stance than the U.S. Federal Reserve amid a global shift toward a rate-cutting cycle.
After more than three years of monetary tightening, the BOK lowered its base rate by a quarter percentage point to 3.25 percent during the monetary policy meeting, Oct. 11.
Conversely, the Fed enacted a half-percentage-point cut in September, lowering the base rate to a range of 4.75 percent to 5 percent.
The Fed signaled additional rate cuts, while the BOK remains cautious about such moves due to the increasing level of household debt in Korea.
“As the aggressive U.S. rate cut policy is anticipated to attract more investors into the U.S. stock market, its decoupling with the Korean stock market may deepen,” the professor said.
Park Sang-hyun, a researcher at iM Securities, believes that the widening gap between the two countries in the AI market is also the result of the decoupling.
He noted that Samsung Electronics is lagging in the global AI race as it is reliant on traditional, lower-margin semiconductors, instead of high-margin chips that are used in AI servers.
As a result, Samsung Electronics’ valuation fell by more than 120 trillion won ($87.36 billion) in the third quarter.
That decline partially reduced the valuation of the entire KOSPI by 189 trillion won during the same period.
In the U.S. stock market, shares of AI chip giant Nvidia have surged over 233 percent in the past year, solidifying its dominance in the market.
An analyst, speaking on the condition of anonymity, projected that a potential victory for former U.S. President Donald Trump on Nov. 5 could negatively impact Samsung Electronics and the Korean stock market.
“We don’t know how the course of the global chip supply chain will change if Trump is re-elected,” he said.