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| A dealer at Hana Bank works at its dealing room in Seoul, Wednesday morning. Yonhap |
By Lee Min-hyung
Korea's growth stocks and exchange-traded funds (ETFs) are headed for a rebound amid reviving investor confidence driven by growing hopes for the end of the U.S. Federal Reserve's rate hike cycle.
According to data from the Korea Exchange, most growth-related ETFs have enjoyed a double-digit rally for the past month. The TIGER KRX BBIG K-New Deal Leverage ETF jumped by 45.44 percent between Oct. 17 and Nov. 14. The index consists of Korea's representative growth stocks in industries such as secondary batteries, internet and games.
The increasing likelihood for the Fed to control its pace of rate hikes helped boost the rally after the country's consumer price index reported a lower-than-expected rise for October. This has built up expectations for the Fed to discontinue its aggressive rhetoric sometime around the end of this year.
Other growth ETFs also placed their names on the list of the most profitable ETFs. The TIGER KRX Secondary Batteries K-New Deal Leverage ETF also soared by 28.39 percent during the same period. LG Energy Solution, the nation's most valuable battery firm by market capitalization, faced turbulent ups and downs in its stock price this year, but starting this month, shares of the firm have shown a sharp upward trajectory on hopes for an imminent end to the Fed's cycle of monetary tightening.
The valuations of game stocks also bounced back recently due to a similar sense of expectation. This year's global rate hikes dealt a severe blow to shares of Krafton, one of the nation's most influential game firms, with its valuation halving from a previous high. But the shares are showing signs of a robust rally this month on the growing possibility of monetary normalization here and abroad.
Given that price movements of growth stocks are hit hard by external macroeconomic factors, chances are they will be able to enjoy additional momentum for a rally when the Fed and the Bank of Korea (BOK) send gestures for their monetary policy shifts.
"Other countries ― such as Australia, Canada and Norway ― have also started adjusting their pace of rate hikes due to such reasons as household debts and housing market problems," said Kang Seung-won, an analyst at NH Investment & Securities. "The BOK will also likely control the pace of rate hikes."
IBK Investment & Securities also recently selected growth stocks as its top pick for next year, citing their possibly stronger-than-expected rebound after the end of the Fed's monetary tightening.
"The Fed is likely to end its rate hike cycle sometime in the first quarter of 2023, and other major economic indexes will hit the bottom between the first and second quarters of next year," IBK Investment & Securities analyst Byun Joon-ho said.
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