South Korea’s benchmark Kospi closed at 2,504.51 Monday, its lowest level since Nov. 13, 2020 when it fell to 2,493.87, as investors priced in a big US rate hike amid a record annual increase in US consumer prices in May.

A month earlier, US consumer prices surged 8.6 percent on-year, the largest gain since 1981 on record-high gasoline prices and soaring food costs, fueling bets on a sharper rate hike than the half percentage point raise the US Fed had indicated. The Fed’s two-day policy meeting starts Tuesday.

“The Kospi will seesaw this week as the meeting is held,” said Seo Sang-young, an analyst at Mirae Asset Securities. “Persistent inflation means an impending slowdown in US demand, which in turn is stoking growth worries. Foreign investors here are rattled.” 

Foreign investors, who currently hold roughly one-third of Korean stocks, were net sellers between January and May this year, having offloaded a combined 16.3 trillion won ($12.4 billion) in shares traded on the main board Kospi and junior Kosdaq.

Foreign and institutional investors carried on a sell-off Monday, outweighing a buying spree from retail investors. Shares of market bellwether Samsung Electronics closed at 62,100 won apiece, a new 52-week low, while tech giants like Naver and Kakao also posted losses.

Local brokerages said the Kospi will hold out on a 2,500-point range, potentially sliding to as low as 2,400. Few firms are betting on an immediate rebound taking the benchmark back to the 3,000-point range it last reached on Jan. 3 this year.

NH Investment & Securities said the benchmark would seesaw between gains and losses later in the year, reaching as low as 2,400 and as high as 2,850. The projection was shared by rival companies, except for Samsung Securities and Korea Investment & Securities.

The two firms expected to see the main board returning to a 3,000-point range by year-end because inflation will have peaked well before, and investors will no longer be facing uncertainties from a clearly hawkish US Fed.

The Yoon Suk-yeol government is set to reveal this week an economic road map for the next five years for the first time since Yoon took office on May 10. The new economic plan could provide growth momentum, Korea Investment & Securities added.

Ahead of the announcement, President Yoon, who has long championed business-friendly rules, reiterated deregulation efforts Monday as Asia’s fourth-largest economy looks to avoid anemic growth.

Concerns over stagflation -- a blend of low growth and high prices -- are pushing Korea to back aggressive policy tightening to cool the highest inflation in years. The Organization for Economic Cooperation and Development has said consumer price increases in Korea for this year will hit a 24-year high.

The Bank of Korea has already lifted interest rates three times this year, doing so at every policy meeting except for the one in February -- a decision experts say demonstrates the central bank’s determination to alleviate the increasing price burden on consumers.

The central bank, which has raised interest rates by 1.25 percentage points in five stages since August last year from the record low of 0.5 percent to 1.75 percent, is expected to lift borrowing costs in July.