South Korean stocks rallied early Thursday as market uncertainties subsided after the U.S. Federal Reserve announced the plan to trim its monetary stimulus.
The benchmark Korea Composite Stock Price Index (KOSPI) climbed 15.04 points, or 0.76 percent, to 1,989.67 as of 10 a.m., after starting off the session more than 1 percent higher at the opening bell.
Analysts in Seoul said investors increased bets as the prolonged anxiety about the reduction of the quantitative easing (QE) was lifted, giving them a clearer picture as to where the monetary policy of the world's No. 1 economy is heading.
"The market became less and less sensitive to the tapering concerns since it was first brought up six months ago. So long as the economy continues its recovery path, the market won't be swayed by it," said Park Sung-hoon, an analyst at Woori Investment & Securities Co.
The Fed said on Wednesday (U.S. time) it will start scaling back the $85 billion monthly bond-purchase program by US$10 billion to $75 billion from January 2014.
The U.S. central bank cited the latest economic indicators that reflected signs of a recovery in the country from its worst recession since the 1930s.
The world's largest economy showed a steady rise in employment in October and November, with retail sales and industrial production beating the market consensus last month.
On Wednesday, a robust pickup in U.S. housing starts, which hit a nearly six-year high, underscored the Fed's interpretation of the strengthening economy.
But analysts expressed concerns on the weaker yen, a key downside risk for the export-driven Korean economy, as the tapering is likely to further exert upward pressure on the dollar.
"A stronger dollar is a positive sign for exports, but if the yen depreciates at a faster pace to the dollar than the won does, it could have an adverse effect on Korea," said Bae Sung-young, an analyst at Hyundai Securities Co.
The Japanese currency lost ground against the greenback following the Fed's decision, surpassing the 104 yen mark earlier. It was quoted at 104.11 yen per dollar as of 10 a.m. (Seoul time).
The Korean won was trading at 1,054.90 won to the dollar at the same time on the Seoul market, down 3.7 won from Wednesday's close, and also slightly weaker to the yen at 1,012.92 won per 100 yen. (Yonhap News)
