Investors to watch FOMC result

This Friday’s financial indexes of South Korea, along with the Australian, Japanese and Chinese counterparts, are expected to draw great attention from capital investors at home and abroad as they could possibly be a barometer for global funds’ flow direction.

The Asia-Pacific markets will shortly be exposed to impacts from the overnight interest rate-setting of the Federal Open Market Committee, whose monthly meeting is slated for Sept. 16-17 in Washington.

The decision of U.S. monetary policymakers ― a rate hike or freeze ― is scheduled to be unveiled at around 3 a.m. Korean time on Sept. 18.

There is a high possibility that the benchmark KOSPI and the won-dollar exchange rate will fluctuate for several hours starting from 9 a.m. in the coming Sept. 18 trading session.

The committee's rate-setting is to initally affect the last two hours of the U.S. market's Sept. 17 trading session before the impact moves to the first overseas major group ― Korea, Japan and Australia ― whose daily bourses are to simultaneously open.

Many analysts share the view that index volatility for hours or days would be inevitable in either of the scenarios, though the issue has already sufficiently been reflected in the local market over the past few months.

If the Federal Reserve chooses not to raise the base rate this month ― the sixth of the eight totally-set gatherings for 2015 ― the uncertainty will possibly linger on for a quarter more to December, when the final gathering is to be held. It has generally kept the rate untouched when FOMC meetings were unaccompanied by a press conference.

The seventh gathering on Oct. 27-28 will convene without a media briefing by Fed Chair Janet Yellen. Skipping November, the final one is scheduled for Dec. 15-16.

Some are betting on policymakers’ surprise selection of the timing while the majority is split between September and December, both of which would include Yellen's briefing and media questions like the cases in June and March.

“I would issue the possibility that the FOMC could raise the rate in October (when not accompanied by a Q. and A. session),” said SK Securities analyst Kim Dong-yeob.

The first of the 2016 meetings is to be held on Jan. 26-27 without a briefing while the second one, scheduled for March 15-16, will contain the Q&A. 

The U.S. dollar has continued to gain since the second quarter of the year to hover around the 1,200-won mark, and foreigners net-sold equities worth about 5 trillion won ($4.2 billion) on the main bourse Korea Exchange over the past month.

Despite the symptoms of capital flight, more and more observers are cautiously raising the feasibility that foreign investors will eventually return to the Korean and other emerging markets.

Hana Daetoo Securities executive director Park Moon-hwan also downplayed a longer-term bearish position of local stocks, alleging that global investors are taking a wait-and-see attitude until the uncertainty dissipates.

He predicted that foreigners will post a net-buying streak in the coming weeks.

In addition to the U.S. rate-setting ― as more analysts point out ― a fresh issue is whether Japan will press for another round of quantitative easing later this year.

As a result, the Bank of Japan’s monthly monetary policy meeting, slated for Sept. 15-16, is drawing wide attention.

Apart from this week’s gathering, the BOJ ― in accordance with its administration ― could possibly decide to print more yen in its next meetings in its reported bid to devalue the currency for export boosts, Korean observers have commented.

On that assumption, the “currency war” would be rekindled and widened among the three major Asian economies, including Korea and China. The EU and the U.S. could follow suit.

“The U.S. may delay the rate hike if there are unexpected factors from Japan or China,” said a local financial firm executive.

By Kim Yon-se (kys@heraldcorp.com)