Korean Investors Advised to Favor Earnings Growth Over Rate Bets

Chairman Kevin Warsh of the U.S. Federal Reserve (Fed) has reopened the possibility of a rate hike at Jackson Hole, sending shockwaves through global markets. In response, Hana Securities is urging Korean investors to shift their strategy and focus on stocks with clear earnings growth.

Kim Doo-eon, a researcher at Hana Securities, pointed out that investors should no longer rely solely on rate cuts but instead look for corporations whose profits can withstand higher rates.

The analysis suggests that semiconductors, high-bandwidth memory (HBM), and power infrastructure tied to artificial intelligence (AI) data centers could be relatively favorable compared to interest-rate sensitive stocks with high price-to-earnings ratios.

Warsh's comments at Jackson Hole did not directly declare a rate hike but instead emphasized that further action would be needed if inflation does not settle quickly enough. The market immediately priced in a higher chance of a rate hike, with the probability of the Federal Open Market Committee (FOMC) raising the policy rate by 25 basis points in September rising to 57% from 35%.

Hana Securities sees a growing chance that the Fed will change its judgment based on shifts in economic indicators such as inflation and employment, making it harder for investors to predict future rates based solely on Fed remarks. Rate volatility could rise compared to before.