▲ AI PRISM* Personalized Economic Briefing
* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.
[Key Issue Briefing]
■ Stock markets during rate-hike cycles: A Seoul Economic Daily analysis of four major rate-hike cycles over the 30 years since 1996 found that the Nasdaq Composite Index rose in every case from the first hike to the last. Bubble collapses and sharp price declines instead gained momentum only after central banks began cutting rates.
■ Fed shifts to tightening: The U.S. Federal Reserve raised its benchmark rate for the first time in three years and two months, turning toward tightening as crude oil prices climbed and inflation pressure mounted. Fed Chair Kevin Warsh said inflation was too high and had persisted too long, leaving open the possibility of further increases this year.
■ Correction in Korean stocks: Growth premiums at the three Hyundai Motor (005380) Group affiliates unwound quickly as expectations for robotics and physical artificial intelligence weakened. Meanwhile, a leveraged exchange-traded fund manager pointed to Korean investors' tendency to hold positions long term and raised the need for exit strategies.
[Top News for Financial Product Investors]
1. Nasdaq Doubled During Dot-Com Rate Hikes
- Key points: Contrary to the widely held view that stocks turn lower whenever monetary policy tightens, past rate-hike cycles did not lead directly to sharp declines. The reason, analysts say, is that central banks can raise rates only when the real economy is solid and corporate earnings are holding up. During the dot-com bubble, when the Fed lifted its benchmark rate by 1.75 percentage points from 4.75% to 6.50% between June 1999 and May 2000, the Nasdaq rose 26.6%, and in March 2000 it hit 5,048.62, up 88.0% from just before the first hike. The Nasdaq bottom, by contrast, came in October 2002, when the Fed had cut rates to 1.75% and was standing pat, with the index down 77.9% from its peak.
2. Fed Raises Rates for First Time in Three Years, Signaling Tougher Tightening
- Key points: The Fed raised its benchmark rate by 0.25 percentage point at its Federal Open Market Committee meeting on the 16th, with all 12 voting members in agreement. That lifted the U.S. benchmark rate to 3.75-4.00%, putting the upper end 1.00 percentage point above Korea's 3.00%. In its dot plot, a chart showing individual Fed officials' rate projections as dots, the Fed put the median year-end rate at 4.125%, signaling room for further increases. The 10-year U.S. Treasury yield surged to 5.027%, and the won closed daytime trading at 1,382.2 per dollar, 13.6 won weaker than the previous session.
3. Hyundai Motor Trio Hits the Brakes as 100 Trillion Won in Value Evaporates in Three Months
- Key points: The combined market capitalization of Hyundai Motor, Kia (000270) and Hyundai Mobis (012330) fell to 155.7496 trillion won on the 17th from 255.9413 trillion won on June 15, a drop of 100.1917 trillion won, or 39.1%. Hyundai Motor slid 43.9%, while Hyundai Mobis and Kia fell 40.5% and 27.8%, respectively. Hyundai Motor's 12-month forward price-to-earnings ratio, which had climbed to 18 times in early June on hopes for its robotics business, has since eased to 9-10 times. Analysts see a stronger yen, which briefly pushed the dollar-yen rate down to the 152 level this month, as a potential catalyst for a rebound.
[Reference News for Financial Product Investors]
4. Korean Investors Hold Leveraged ETFs Longer, Need Loss Limits and Exit Points
- Key points: TRADR ETFs, a U.S. leveraged ETF manager, said Korean investors tend to hold leveraged ETFs longer than their U.S. counterparts. Matt Markiewicz, head of product and capital markets at TRADR ETFs, said leveraged ETFs that track daily returns are not designed to be held long term, advising investors to set clear entry and exit prices and loss limits in advance. As of the 16th, the firm's total net assets stood at about $5 billion, or roughly 6.88 trillion won, of which Korean investors held $438.3 million, or about 603.1 billion won, accounting for roughly 9%. Markiewicz also said Korean stocks have been the top performer in Asia this year but remain somewhat undervalued relative to their earnings growth potential.
5. [Global Hot Stock] Credo Expands Into Optical Communications to Offset AEC Slowdown
- Key points: Credo Technology, which pioneered the market for copper cables used in AI clusters, is broadening into finished optical transceivers and next-generation 1.6-terabit products. Credo's first-quarter revenue for fiscal 2027 came to $479 million, up 114.7% from a year earlier, while earnings per share of $1.20 beat market forecasts. Growth in its core active electrical cable business, or AEC, which attaches signal-correcting chips to both ends of a copper cable, is expected to slow to about 40% this year from a tripling last year. The company acquired DustPhotonics for $1.3 billion in April to secure photonic integrated circuit technology, widening its scope from a component supplier to an optical communications systems provider.
6. Warsh Calls Rising Yields a Sign of a Strong Economy, Brushes Off Criticism of Fed
- Key points: Fed Chair Kevin Warsh cited three factors behind the rise in long-term U.S. Treasury yields at a news conference after the FOMC meeting. He listed a stronger-than-expected U.S. economy as the first factor, and said competition among hyperscalers to raise funds and conditions in conflict zones around the world were also pushing long-term yields higher. After the Fed struck a hawkish tone that confirmed its resolve to curb inflation, the 10-year U.S. Treasury yield fell 3 basis points, or 0.03 percentage point, to 4.99% on the 17th, ending an eight-session winning streak. Markets expect the Bank of Japan to raise its policy rate to 1.25% from 1% at its rate decision on the 18th.
▶Read the full article: Fed Raises Rates for First Time in Three Years, Signaling Tougher Tightening
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