Journalist

Kim Yeon-jae
  • Gulf Crisis, One Month On: Seoul fending off stagnationary pressure with few options
    Gulf Crisis, One Month On: Seoul fending off stagnationary pressure with few options Editor's Note: One month into the Iran war, a conflict that began in the Middle East is rapidly evolving into a broader economic and strategic shock for Asia, and in this special series, AJP examines those spillovers in full — from a comprehensive overview of Asia-wide shocks to industrial realignments, the mounting risk of a third oil shock, and rising security tensions — as the central question shifts from how the war unfolds in the Middle East to how deeply its consequences will be embedded across Asia. SEOUL, March 27 (AJP) -A crisis is simmering - with the won revisiting levels seen during the global financial crisis and bond yields nearing 4 percent even as the base rate remains anchored at 2.5 percent - but Seoul authorities have few firefighting tools left. Even before the United States and Israel launched strikes on Iran in late February, Seoul authorities were struggling to defend the won, pressured by a persistent preference for dollar-denominated assets. The volatility in oil prices following the blockade of the Strait of Hormuz has since rendered much of the country’s reshoring efforts ineffective. Since the invasion began on Feb. 28, Iran’s Islamic Revolutionary Guard Corps (IRGC) has effectively maintained a near-total blockade of the strait, cutting off a critical transit route for crude oil and liquefied natural gas. The Dubai crude has surged to $130 per barrel, more than doubling from $60 at the start of the year, while Brent crude has risen over 40 percent to trade near $100. Asian economies, led by South Korea, are bearing the brunt of the shock. As of January 2026, 70 percent of South Korea’s crude oil imports originated from countries reliant on the strait — including Saudi Arabia, Qatar, the UAE, Kuwait and Iraq — far exceeding China’s dependency of 48 percent. The impact has quickly filtered through to the real economy. Retail prices for gasoline and diesel have risen sharply, while the government’s “emergency maximum price system” has struggled to contain the surge. A revised price ceiling set at 1,930 won per liter — more than 200 won higher than the initial cap — points to the limits of administrative controls and signals a de facto policy retreat. The semiconductor industry is also under strain. South Korea relies on Qatar for 65 percent of its helium supply, a critical input for chip etching processes, raising the risk of disruptions to high-tech manufacturing lines if the blockade persists. According to the Woori Finance Research Institute, if Brent crude averages $100 per barrel for a full year, South Korea’s GDP growth could fall by 0.55 percentage points while consumer prices rise by 0.76 percent. The Hyundai Research Institute warned that if prices exceed $150, growth could slow to near zero. Heightened complexity, deeper impact While South Korea has navigated geopolitical crises before, experts say the current situation is fundamentally different in both scale and structure. Unlike the COVID-19 pandemic — which reduced demand while leaving shipping lanes largely intact — the Hormuz blockade disrupts a vital artery handling more than 20 percent of global trade. The closest historical parallel is the oil shocks of the 1970s, when crude prices surged from $3 per barrel in 1973 to $39 in 1980, nearly doubling gasoline prices domestically. Yet even those shocks, analysts note, were less severe in their immediate supply impact. “What makes the current situation structurally distinct from prior oil shocks is the simultaneous disruption of liquefied natural gas,” said David Bieri, professor at Virginia Tech. “The strait carries not just oil, but also fertilizers and high-tech supply chains — compounding the shock in ways not seen in earlier crises.” Fatih Birol, executive director of the International Energy Agency, echoed that view, noting that current supply losses exceed those seen during past oil crises combined. Domestic policy responses are further constrained by structural vulnerabilities. Household debt, which surpassed 1,852 trillion won in late 2025, limits the scope for aggressive monetary tightening without risking broader financial instability. “Monetary policy must carefully consider the household debt situation to maintain mid- to long-term financial stability,” said Jang Jeong-su, deputy governor general at the Bank of Korea, acknowledging the “force majeure” constraints facing policymakers. Market interventions fueling distrust Despite the gravity of the situation, repeated government interventions — including verbal warnings, foreign exchange operations and a 5 trillion won bond buyback — have done little to stabilize market sentiment. The won has weakened sharply, falling nearly 5 percent since the start of the year and underperforming most regional peers. Bond yields have also climbed, with the 10-year Korea Treasury Bond approaching levels last seen during the peak of U.S. monetary tightening. International institutions have raised concerns over the ad-hoc nature of Seoul’s policy response. “South Korea’s aggressive market interventions risk undermining the predictability of its financial markets,” the Atlantic Council said in a recent report, warning that reliance on short-term measures could erode long-term institutional credibility. Experts have also flagged concerns over fuel subsidy policies. “When supply risks occur, demand must also be adjusted. Setting a price ceiling sends the wrong signal by encouraging continued consumption despite the crisis,” said Kim Hyung-gun, an economics professor at Kangwon National University. The Carnegie Endowment for International Peace similarly warned that expanded subsidies are crowding out social spending and delaying structural reforms that were only viable under more favorable external conditions. 2026-03-27 15:28:45
  • Korean Inc. gloom deepens under war-driven scourges
    Korean Inc. gloom deepens under war-driven scourges SEOUL, March 27 (AJP) - Pessimism deepened across the Korean Inc. in March as businesses grappled with worsening trade conditions, a sharply weaker won and rising energy costs stemming from the monthlong conflict in the Middle East. According to the Bank of Korea on Friday, the all-industry composite business sentiment index (CBSI) stood at 94.1 in March, down 0.1 point from the previous month. A reading below 100 means pessimists outnumber optimists. The reading also fell far short of the BOK's February projection of 97.6, missing the forecast by 3.6 points. Manufacturing sentiment was unchanged at 97.1, but still below the expected 98.9. More worrying was the outlook for April, which fell 3 points to 95.9, the steepest monthly drop in 14 months since January 2025. The deterioration was more pronounced among small and medium-sized enterprises. While the outlook for large firms edged down 0.9 point to 98.7, sentiment among SMEs plunged 2.7 points, underscoring their greater vulnerability to rising costs and supply-chain disruptions. The BOK said gains of 0.6 point each in production and new orders were offset by a 0.6-point drop in inventory conditions and a 0.4-point decline in funding conditions. The data also showed a widening gap between exporters and domestic-oriented firms. Sentiment among exporters rose 1.2 points to 103.1, staying above 100 for a third straight month. By contrast, sentiment among import-reliant domestic businesses stood at just 94.5. "Exports of semiconductors, automobiles and steel products remained solid in the first 20 days of March, partially offsetting the initial impact of the Iran war," Lee Heung-hoo, head of the BOK's economic sentiment survey team, said. He warned, however, that the impact of the Middle East conflict is likely to become more visible in April, further darkening the manufacturing outlook. Non-manufacturing sentiment stood at 92.0, well below the February projection of 96.8, while the April outlook came in even lower at 91.2. Services were hit particularly hard, with the transportation and warehousing sector posting a CBSI of 93.4, far below the earlier projection of 99. "The blockade of the Strait of Hormuz has caused major disruptions in global logistics, dealing a severe blow to the transportation and warehousing sectors," Lee said. Among manufacturers, the most frequently cited business difficulty was "uncertain economic conditions," at 22.1 percent, up 2.8 percentage points from the previous month. Concern over rising raw material prices more than doubled to 21.0 percent, reflecting higher energy and commodity costs linked to the conflict. While weak domestic demand remained a major complaint at 19.0 percent, it lost its position as the top concern from February's 24.6 percent as geopolitical risks moved to the forefront. The broader economic sentiment index (ESI), which combines business and consumer confidence, fell 4.8 points to 94.0, wiping out all gains made in February and marking the sharpest drop since September 2023. Still, the ESI cyclical indicator — which strips out seasonal and irregular external shocks — edged up 0.4 point to 96.6, suggesting the underlying trend may have improved absent the sudden geopolitical escalation. The survey was conducted from March 12 to 19 among 3,524 companies nationwide, with responses from 3,223 firms, including 1,799 manufacturers and 1,433 non-manufacturers. 2026-03-27 10:05:45
  • INTERVIEW: AI may turn Koreas inward finance into strategic edge: Carstens
    INTERVIEW: AI may turn Korea's inward finance into strategic edge: Carstens SEOUL, March 27 (AJP) - Unlike globally recognized industrial giants such as Samsung, LG and Hyundai, South Korea’s financial sector remains relatively underexposed overseas — yet its domestic orientation could become a strategic advantage in the era of artificial intelligence, a former top central banker said. Artificial intelligence is set to fundamentally reshape financial intermediation, from payments to supervision, according to Agustín Carstens, former general manager of the Bank for International Settlements. “AI will facilitate what we call ‘agentic payments,’ but, more importantly, it will significantly enhance the efficiency of transaction settlement,” Carstens said in an interview with AJP. He added that AI-enabled transparency could materially lower compliance costs by allowing regulators to monitor financial institutions in real time. “If regulators have continuous access to banks’ balance sheets and can assess them rapidly using AI, the need for heavy and costly reporting frameworks diminishes considerably,” he said. Carstens also pointed to growing momentum behind South Korea’s digital currency initiatives, particularly the Bank of Korea’s won-based stablecoin project, under incoming governor Shin Hyun-song — a former BIS colleague. Shin’s appointment comes at a critical juncture for financial innovation. Carstens underscored his expertise in tokenization, central bank digital currencies and AI-driven financial systems. “Through the BIS, we have undertaken extensive work on tokenization, central bank digital currencies and the broader impact of AI on the economy,” he said. “He is a leading expert in these areas and is well positioned to sustain the Bank of Korea’s momentum in advancing the digitalization of the financial system.” Carstens was in Seoul to speak at the 19th Asia-Pacific Financial Forum (APFF) 2026, hosted by Aju Business Daily, which this year examined why Korea’s financial sector has lagged its industrial base in global reach. However, longer-term digital ambitions remain contingent on near-term macro risks. South Korea’s energy-dependent economy is highly exposed to disruptions in the Middle East, particularly via the Strait of Hormuz, a critical artery for global oil and gas flows. “Korea depends significantly on energy supplies that transit the Strait of Hormuz,” Carstens cautioned. “Any disruption there could have immediate and material consequences for key sectors of the economy.” Such geopolitical shocks, he added, could weigh on the manufacturing and digital backbone of the economy — even as AI opens a pathway for structural upgrading in finance. 2026-03-27 08:53:57
  • South Korea to buy back $3bn bonds to bolster market
    South Korea to buy back $3bn bonds to bolster market SEOUL, March 26 (AJP) -South Korea will buy back 5 trillion won ($3.3 billion) of sovereign bonds in a rare market intervention to cap a surge in yields that have overshot the policy rate by more than 100 basis points amid the prolonged Middle East conflict. The Ministry of Economy and Finance (MOEF) said Thursday it will conduct the buyback on Friday, targeting Korea Treasury Bonds (KTBs) with maturities ranging from two to 10 years — one of the largest liquidity injections into the local bond market in recent years. The move comes as benchmark yields have spiked sharply, with the three-year KTB rising to 3.558 percent and the 10-year to 3.859 percent on Wednesday, both the highest levels since late 2023. The surge reflects a rapid sell-off in bonds as investors price in geopolitical risk, a weaker won and persistent inflation pressure. The buyback forms part of a broader emergency package that includes tax cuts, policy financing and a supplementary budget, as authorities shift into what they described as a “wartime” economic response to the monthlong Gulf conflict. “In the face of a grave wartime situation, we will mobilize all possible policy tools and the optimal mix,” Deputy Prime Minister for Economy Koo Yun-cheol said at a press briefing. The government said the intervention is aimed at preemptively containing excessive volatility and ensuring stable liquidity in the bond market, where yields have risen well above the 2.5 percent base rate. Bond prices move inversely to yields, and the sell-off has been exacerbated by currency weakness. The won has breached the key 1,500-per-dollar level and continued to slide toward 1,510, adding to upward pressure on market rates. MOEF said it will maintain round-the-clock monitoring of financial markets and coordinate closely with the Bank of Korea to deploy additional stabilizing measures if needed. Whether the intervention will help to reverse the sentiment remains uncertain, unless the war ends and removes oil price-driven inflationary scare. The buyback delivered only a mild lift to shorter-dated bonds while triggering a selloff at the long end, effectively inverting the policy’s intended signaling. The two-year government bond yield fell 2.2 basis points to 3.489 percent, with the three-year little changed at 3.552 percent. But yields further out the curve moved sharply higher: the 20-year jumped 3.9 basis points to 3.880 percent and the 30-year rose 4.6 basis points to 3.762 percent. Rather than easing overall financing conditions, the move steepened the curve — a sign that investors see the intervention as a near-term liquidity patch, not a solution to underlying inflation and supply risks. In effect, the market is pricing in more pressure ahead, demanding higher compensation for holding long-dated debt even as the government steps in. Immediate market response was lukewarm — and telling. The buyback delivered only a mild lift to shorter-dated bonds while triggering a selloff at the long end, effectively inverting the policy’s intended signaling. The two-year government bond yield fell 2.2 basis points to 3.489 percent, with the three-year little changed at 3.552 percent. But yields further out the curve moved sharply higher: the 20-year jumped 3.9 basis points to 3.880 percent and the 30-year rose 4.6 basis points to 3.762 percent. Rather than easing overall market conditions, the move steepened the curve — a sign that investors see the intervention as a near-term liquidity patch, not a solution to underlying inflation and supply risks. In effect, the market is pricing in more pressure ahead, demanding higher compensation for holding long-dated debt even as the government steps in. 2026-03-26 15:05:06
  • Rising subprime borrowers face delinquency risk amid fast rate rises in Korea
    Rising subprime borrowers face delinquency risk amid fast rate rises in Korea SEOUL, March 26 (AJP) - A growing pool of overleveraged, subprime borrowers is emerging as a key financial risk in South Korea, with war-driven surge in market and dollar rates amplifying repayment stress. Data released Thursday by the Bank of Korea (BOK) showed the share of “subprime borrowers” — defined by the BOK as individuals with loans from three or more financial institutions, belonging to the bottom 30 percent income bracket and holding low credit ratings who would bear much higher borrowing terms — rose to 6.7 percent at end-2025, up from 6.4 percent in the previous quarter. The ratio had hovered near 7 percent earlier in the year before easing temporarily on the back of the government’s “bad bank” debt relief program, which targeted long-term small-scale delinquencies. The improvement, however, proved short-lived, reversing within a quarter. More concerning is the steady buildup of borrowers at risk of slipping into that category. The share of “potentially vulnerable borrowers” climbed from 17.5 percent at the start of 2025 to 18.0 percent by the fourth quarter, signaling a widening pipeline of credit-strained households. With debt spread across multiple institutions, repayment risks are compounding. Such borrowers face heightened exposure to “Ponzi-like” rollover behavior, making them particularly vulnerable to default if income fails to keep pace with rising interest costs. The BOK defines this group broadly as either middle-income borrowers with multiple loans or low-income borrowers with debt from at least two institutions. Corporate indicators point to a parallel strain, underscoring a deepening K-shaped divergence. The share of “zombie” small and medium-sized enterprises (SMEs) — firms with an interest coverage ratio (ICR) below 1.0 — jumped to 61.4 percent in the third quarter, up from 56.9 percent in the second quarter. The figure is nearly double that of large conglomerates, at 32.6 percent. SMEs’ average ICR stood at minus 0.4, indicating operating profits are insufficient to cover even interest payments, while large firms improved to 4.7, widening the corporate gap. The outlook is darkening further as external shocks intensify. The Korean won has weakened past the 1,500-per-dollar level — a threshold last seen during the global financial crisis — amid disruptions tied to the effective closure of the Strait of Hormuz. Korea’s heavy reliance on Middle Eastern energy has amplified the impact. Market rates, a key gauge of borrower stress, have also surged. As of Wednesday, the three-year government bond yield stood at 3.558 percent, up 21 percent year-to-date, while the 10-year yield climbed to 3.859 percent, more than 100 basis points above the 2.5 percent policy rate. “If holding rates steady has not eased principal and interest burdens, it suggests income weakness across households and firms has not been fully reflected,” said Jang Jeong-su, deputy governor general for financial stability and payments. “As market rates rose, delinquency rates followed, increasing the number of vulnerable borrowers and firms,” added Kim Jeong-ho, head of the BOK’s stability analysis team. Officials also flagged the policy dilemma facing incoming BOK Governor nominee Shin Hyun-song. “While a rate hike could support financial stability, it would also increase the burden on vulnerable borrowers and firms,” Jang said, noting the central bank will closely monitor both domestic conditions and external risks, including developments around the Strait of Hormuz. 2026-03-26 13:44:14
  • Koreas relative under-globalized may underpin Korean Inc. strength
    Korea's relative 'under-globalized' may underpin Korean Inc. strength SEOUL, March 25 (AJP) - South Korea’s financial sector may look under-globalized next to the country’s export-driven industrial giants, but that is not necessarily a weakness, former Bank for International Settlements (BIS) General Manager Agustín Carstens said Wednesday. Speaking at the 19th Asia-Pacific Financial Forum (APFF) 2026 in Seoul, Carstens said Korea’s financial system has played a strategically effective role by channeling resources into the country’s strongest industries rather than simply pursuing international expansion for its own sake. “The fact that it does not internationalize so much doesn’t mean that it’s a failure of the Korean banking system,” Carstens said at the forum hosted by Aju Business Daily and ABC at The Plaza Seoul. “Basically, what the financing strategy of Korea has done is concentrating on the winner sectors, and you chose very well who the winners would be — the automobile industry, the appliance industry, the shipping industry, the building industry, semiconductors, and so on.” This year’s forum, held under the theme of why Korean finance remains largely domestic while non-financial Korean companies have expanded aggressively abroad, drew banking leaders, policymakers and lawmakers, including Aju Business Daily President Lim Kwu-jin, Reform Party leader Rep. Lee Jun-seok, and People Power Party lawmakers Rep. Yoon Han-hong and Rep. Kang Myung-gu. Carstens, who previously served as governor of Mexico’s central bank before leading the BIS, said the domestic focus of Korean finance should be understood in the broader context of its economic role. “The financial system plays a tremendously important role in the economy and it basically transforms savings into investment,” he said, stressing that finance serves as the foundation for industrial growth. He also said global supply chains are no longer being shaped solely by economic efficiency. “Supply chains are being reorganized along geopolitical lines, not purely economic lines,” he said. That shift, he added, is part of a broader structural transformation in which manufacturing will gradually lose its dominance as the main engine of employment. “Manufacturing will be less important in the economy and will not be the main source of employment,” he said. In a dialogue session that followed, Carstens spoke with Kim Jun-san, senior researcher at the KB Financial Group Research Institute, on the future of Korean finance, deglobalization and digital money. On trade fragmentation, Carstens argued that deglobalization should be seen less as a breakdown than as a reshuffling of existing patterns. “Deglobalization means reorganization of trade,” he said, describing the return of protectionism as a restructuring of the global order rather than its collapse. On digital finance, Carstens reiterated his skepticism toward stablecoins, saying, “stable coins by themselves are not stable,” and instead laid out a vision centered on central bank digital currencies. He said the future financial system should enable “transactions with anybody at any time in any currency immediately,” underscoring the need for an integrated system built around central bank-backed digital infrastructure. Carstens also briefly noted that Shin Hyun-song, the former BIS Monetary and Economic Department chief and a longtime colleague, is an expert in digital finance. The forum then turned to artificial intelligence and digital assets. Kim Jun-san described AI as more than a tool for efficiency, calling it “core infrastructure reshaping entire industries.” He said finance has moved beyond simple digital transformation into what he called an era of “intelligent transformation,” in which AI fundamentally changes business models and customer experiences. Citing JPMorgan as an example, Kim said AI adoption should not be limited to automation, but should be approached as a force capable of reshaping the business itself. He argued that South Korea should focus less on competing head-on with the United States and China in foundation models and more on embedding AI quickly and deeply across existing industries. “Korea is not so much a country that makes AI best, but a country that adopts and utilizes it fastest,” he said. “In the AI era, data, organization, and usage methods determine competitiveness more than technology.” Park Jung-pil, head of the Digital Innovation Office at the Bank of Korea, echoed that view, saying the success of AI adoption at a central bank depends less on the technology itself than on data governance and institutional readiness. “Data governance is most important in the process of adopting AI,” Park said, emphasizing that data must be reorganized into a form AI systems can effectively use, rather than merely accumulated. He added that cultural and human factors remain a critical obstacle. “There is also cultural resistance from users who do not want to use AI,” he said, calling for parallel efforts to reshape organizational culture and strengthen workforce capability. Kim Min-seung, head of the Korbit Research Center, closed the session with an overview of the digital asset market, describing the current phase as a shift “from regulation-centric to institutional integration.” He said virtual assets, once viewed negatively by political and financial circles, have gained legitimacy following exchange-traded fund approvals and policy changes, particularly in the United States. “The market has continuously grown despite political and institutional pressure,” Kim said, adding that digital assets are increasingly being seen as strategic national assets. Still, he said, regulatory refinement remains essential as on-chain finance moves closer to becoming part of the broader financial system. 2026-03-25 17:29:16
  • BOK chief nominees hawkish instincts to face Gulf-driven inflation test
    BOK chief nominee's hawkish instincts to face Gulf-driven inflation test SEOUL, March 24 (AJP) —The choice of former Bank for International Settlements (BIS) economist Shin Hyun-song as the new central bank chief reflects a “firefighting” role against the Gulf War-driven perfect storm South Korea faces, and according to a former BIS colleague, he is best suited for the job. How far and how fast the Bank of Korea governor nominee will translate his hawkish academic stance into policy is now the market’s central question, as Shin is set to take the helm amid growing inflationary pressure from the Gulf war fallout. President Lee Jae Myung on Sunday has tapped Shin, a former BIS head of research, as the next BOK governor. Shin, according to Agustín Carstens - former general manager of the Bank for International Settlements (BIS) in Seoul to speak at the Asia-Pacific Financial Forum hosted by Aju Media Corp. on Wednesday - “has a mixture of characteristics that is very unique.” He "knows the Korean economy and financial system very well, and is an expert in macroeconomics and finance, including the connections between Korea and the rest of the world", Carstens said, adding that makes him the ideal monetary chief to “assess the shocks that the world and financial system is experiencing and to assess how it would affect the Korean economy very well.” Given his academic track record, Shin is widely viewed as more responsive to shocks than incumbent Rhee Chang-yong, whose policy stance has often been seen as cautious. Critics, including Democratic Party lawmaker An Do-geol, argue that the BOK’s passive signaling under Rhee contributed to a surge in household lending. “With the won hovering near 1,500 and 10-year yields pushing above 3.8 percent, the president appears to have seen a ‘firefighter’ in Shin,” an anonymous finance ministry official said. Markets have already begun pricing in a more hawkish turn. The three-year bond yield spiked to above 3.6 percent and the 10-year yield climbed to 3.8 percent upon the announcement, sharply above the 2.50 percent base rate. Shin’s reputation as a policy hawk dates back to his early work during the global financial crisis. In a Federal Reserve Bank of New York paper, he warned that loose monetary policy fuels balance sheet expansion and asset bubbles, underscoring the need for preemptive tightening. He reinforced that stance in a 2022 interview, arguing that “it is better to overreact with rate hikes than to be timid” when tackling inflation. His framework extends beyond rate policy. In a 2012 NBER paper, Shin highlighted “non-core liabilities” such as certificates of deposit and financial bonds as key sources of systemic risk, calling for tighter monitoring during credit booms. Yet Shin is not a one-dimensional hawk. At the BIS, he has also emphasized policy calibration. In a March 16 briefing on a potential Strait of Hormuz disruption, he suggested central banks may “look through” temporary supply shocks rather than react mechanically with rate hikes. This places Shin at the center of a clear policy tension: a hawk in principle, but pragmatic in execution. His communication philosophy also signals a shift. In a 2017 BIS speech titled “Can central banks talk too much?”, Shin warned that excessive signaling risks trapping policymakers in an “echo chamber,” diminishing the effectiveness of forward guidance. This contrasts with Rhee’s tenure, which featured frequent communication on structural factors such as demographics, supply chains and social dynamics. Despite these nuances, few dispute that Shin will respond proactively to inflation risks. “We expect Shin to favor tightening once excess liquidity and easing financial conditions become evident,” said Kim Jin-wook of Citi, who forecasts two 25-basis-point hikes this year. KB Securities’ Lim Jae-kyun did not fully agree, saying that if the Gulf-driven shock proves temporary and inflation expectations remain anchored near 3 percent, the BOK may refrain from immediate tightening. Beyond traditional monetary policy, the BOK under Shin's watch is expected to accelerate digital agenda. Carstens, described him as a "world-leading expert" in the impact of technological change, including tokenization and artificial Intelligence and was confident Shin would bring "a lot of dynamics, or continue the dynamics, of what the Bank of Korea has started to do in terms of digitizing the financial system and the role of the central bank.” 2026-03-25 10:04:02
  • Koreas PPI extends gains for sixth month in Feb; war-driven pressure yet to hit
    Korea's PPI extends gains for sixth month in Feb; war-driven pressure yet to hit SEOUL, March 24 (AJP) — South Korea’s producer prices rose for a sixth straight month in February, as higher energy and commodity costs lifted input prices across the board, pointing to building import-driven inflation pressure even before the full impact of war-related shocks. The producer price index (PPI) stood at 121.36 (2020=100) in February, up 0.6 percent from a month earlier, according to preliminary data released by the Bank of Korea (BOK) on Tuesday. On a year-on-year basis, the index rose 2.4 percent, the fastest pace since a 2.6 percent gain in July 2024. The increase was led by industrial goods, which rose 0.6 percent on-month. Coal and petroleum products surged 4.0 percent, exerting strong upward pressure on the overall index. Prices climbed sharply for diesel (7.4 percent), naphtha (8.7 percent) and gasoline (5.3 percent), reflecting higher global oil benchmarks. Dubai crude, for instance, rose 3.6 percent in February amid heightened Middle East tensions. Utility costs also picked up. Gas prices for industrial use rose 1.8 percent from a month earlier, pushing up the broader category of electricity, gas and water. A persistently weak won added to cost pressures, lifting import prices even before disruptions to the Strait of Hormuz following attacks on Iran. The domestic supply price index, which tracks inflation in the production pipeline, rose 0.5 percent on-month. Raw material prices increased 0.7 percent, reversing a 0.9 percent drop in January, while intermediate input costs rose 0.6 percent, contributing 0.2 percentage points to final goods prices. Yet the February data likely understate the scale of inflationary pressure ahead. The won-dollar exchange rate closed February at 1,438.4. By Monday, it had surged 5.5 percent to 1,517.6 won, while global oil prices have jumped roughly 50 percent from late February levels, suggesting the bulk of war-driven cost pressure has yet to feed through into producer prices. 2026-03-24 08:49:17
  • Frenzied retail stock buying triggers Seoul warning on forced liquidation
    Frenzied retail stock buying triggers Seoul warning on forced liquidation SEOUL, March 23 (AJP) - Leveraged stock buying by retail investors remained feverish on Monday despite 6-percent rout on escalating Gulf war fears, prompting the financial regulator to warn on forced liquidations. The Financial Supervisory Service issued a set of guidelines on Monday aimed at preventing disputes in margin trading, saying recent sharp swings in the domestic stock market had heightened the risk of forced sell-offs for investors using credit financing. “When the domestic stock market has recently shown sharp volatility, the risk of forced liquidation for investors using credit financing has increased, and related disputes and complaints are being steadily filed,” the regulator said. The FSS noted that investors are often swept up in fear of missing out during rallies. As share prices rise, it becomes harder to enter the market with cash alone, pushing some investors to rely on margin loans. When prices then fall sharply, mandatory liquidations are triggered if the collateral ratio drops below 140 percent. Outstanding margin balances surged 21.5 percent in just over two months, rising from 27.4 trillion won ($18.13 billion) at the start of the year to 33.3 trillion won as of March 20. Saying many disputes stem from investor misunderstanding or oversight, the FSS issued several reminders. For complaints that investors did not receive advance notice before forced liquidation, the regulator advised checking whether the brokerage’s phone number had been blocked. Under the Capital Markets Act, brokerages are required to notify clients before carrying out a margin call sale. In cases where investors argued that more shares were sold than necessary to cover the collateral shortfall, the FSS said they must take into account the so-called haircut, or discount rate. Forced liquidations are typically executed at prices discounted by up to 30 percent from the previous day’s close, and the 140 percent collateral ratio should be calculated on that basis. The watchdog also cautioned against relying on intraday price movements when calculating collateral ratios. Even if the ratio appears stable during trading hours, a forced liquidation can still occur if the requirement is not met at the closing price. It also stressed that investors should not treat forced liquidation itself as the reason they failed to make a profit. If a liquidation involves multiple stocks and an investor wants to protect a particular holding, the investor must request a change in liquidation priority in advance through the brokerage. For example, if the default order is A-B-C, the investor may ask that B and C be sold first to preserve stock A. The FSS added that disputes involving overseas stocks are also common, as many investors underestimate how exchange-rate swings and the higher volatility of individual foreign stocks can quickly erode collateral ratios. It also noted that interest-charging methods on margin loans differ by brokerage, and that prolonged delinquency on unsettled receivables may make future credit trading more difficult While the KOSPI ended Monday 6.5 percent lower, retailers bought a net 7 trillion won, matching the selling by foreign and local institutions. 2026-03-23 17:09:52
  • FX deposits fall for second month on overseas investment, import payments
    FX deposits fall for second month on overseas investment, import payments SEOUL, March 23 (AJP) - Resident foreign currency deposits in South Korea declined for a second straight month in February, as corporate demand for overseas investments and import settlements weighed on balances. According to data released Monday by the Bank of Korea (BOK), outstanding resident foreign currency deposits at foreign exchange banks stood at $117.53 billion at end-February, down $490 million from a month earlier. The decline follows a sharper $1.4 billion drop in January, extending the downward trend. Resident foreign currency deposits include holdings by domestic residents, local companies, foreigners residing in Korea for more than six months, and foreign corporations operating in the country. By currency, U.S. dollar-denominated deposits fell by $340 million, while Japanese yen deposits declined by $210 million. In contrast, euro deposits rose by $200 million. Corporate deposits — which make up the bulk of total holdings — led the decline, dropping $450 million to $100.23 billion. Individual deposits edged down $40 million to $17.31 billion. By institution, deposits at domestic banks decreased by $280 million, while those at local branches of foreign banks fell by $210 million. The BOK said the decline in dollar deposits was driven by outbound investments and payments for import bills, while the drop in yen deposits reflected settlements of current account transactions. The data suggest the continuation of demand-driven fluctuations seen in recent months. In January, euro deposits had also declined, largely due to corporate payment needs. 2026-03-23 14:50:14