Kospi falls as Bank of Korea holds rates, flags hawkish outlook
Kospi fell about 1% after the Bank of Korea kept its policy rate at 2.50% but raised inflation and growth forecasts; the won weakened and the 10-year yield hit 4.105%.
The Kospi Index slipped more than 1% on Thursday after the Bank of Korea left its benchmark rate at 2.50% and revised up its inflation and growth forecasts. The index fell to about KRW 8,133 from a weekly high near KRW 8,480. The won weakened against the dollar and the 10-year government bond yield rose to 4.105%.
The central bank left the policy rate unchanged at 2.50% as expected but raised its annual inflation forecast to 2.7% from 2.2% and lifted the full-year growth estimate to 2.6% from 2.0%. The bank cited a stronger-than-expected first-quarter expansion of 1.7%, the fastest pace in six years. Markets moved to price a greater chance of a rate increase later in the year.
Investors sold equities and local currency while pushing bond yields higher. Heavyweight Samsung Electronics fell about 1.5% while SK Hynix gained roughly 1.3%. Together the two firms account for a large share of the index’s market capitalization, which has exceeded $1 trillion this year.
Oil and geopolitical developments added to market caution. Brent crude traded near $96 a barrel and U.S. West Texas Intermediate was around $90. President Donald Trump indicated he was not concerned about the midterm election when considering whether to end or continue the conflict and said he was not satisfied with Iran’s offers for a 60-day ceasefire. South Korea imports most of its crude oil from the Middle East, a factor for markets watching supply risks.
Some analysts described Thursday’s decline as a pullback within a larger uptrend, noting the Kospi retested support near KRW 8,048 and remained above key moving averages. Those analysts identified a potential upside target near KRW 10,000 if momentum in AI-related stocks continues, while warning that a drop below recent lows could open the way to roughly KRW 7,050, the May 20 low that forms the neckline of a double-top pattern.
Economists polled expect the Bank of Korea to consider raising rates at its September meeting. Market participants will watch upcoming data and central bank meetings for signals on the timing of any tightening.
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