China's silver export curb adds cost pressure on Korea' tech activities SEOUL, January 02 (AJP) - China’s move to tighten controls on silver exports is set to add fresh cost pressure on South Korean industries heavily reliant on the precious metal, at a time when prices are already surging on strong demand from high-tech and clean-energy sectors. From Jan. 1, exporters in China must obtain government approval to ship silver overseas, after Beijing added the metal to its “2026 List of Goods Subject to Export Licensing Administration.” The measure places silver alongside tungsten, antimony and rare earth elements — materials China has increasingly treated as strategic assets in its economic and technological rivalry with the United States. China dominates the global silver supply chain, accounting for an estimated 60 to 70 percent of internationally traded refined silver. It also ranks second worldwide in silver reserves and mine output, trailing only Mexico, reinforcing its position as a pivotal player capable of influencing global supply conditions. The policy comes as silver has emerged as “the new gold,” buoyed by soaring demand tied to its wide industrial applications and its appeal as a hedge asset. Silver futures surged more than 150 percent in 2025, rising from around $20 per troy ounce at the start of the year to about $71 by the final trading session — the strongest gain among major commodities. The rally was driven by five consecutive years of global supply deficits and a weakening U.S. dollar, which boosted demand for safe-haven assets. Although prices briefly retreated from a late-December peak of $86 per ounce, China’s export curbs reignited market momentum. Silver prices jumped about 3 percent on Friday, approaching $73 per ounce as of 1:30 p.m. For South Korea, the trend poses a growing headwind. Silver is a critical input across the country’s high-tech manufacturing base, including electronics, semiconductors and advanced materials, as well as a key component of the domestic smelting industry. The metal plays an increasingly central role in the AI and digital era due to its superior electrical conductivity — the highest among major metals. It is used as a protective coating to prevent copper oxidation in printed circuit boards, and as electrodes in multilayer ceramic capacitors (MLCCs), both of which are essential components in smartphones, data centers and AI servers. Beyond electronics, silver is indispensable in solar panels, where silver paste converts sunlight into electricity. It is also used, alongside platinum, as a catalyst in water electrolysis systems for hydrogen fuel production. As a result, rising silver prices directly translate into higher costs and weaker margins across a wide range of advanced industries. The burden is already showing up in trade data. According to the Bank of Korea, import prices for the “other precious metals” category — which includes silver — surged 66 percent year on year in November, exacerbated by both higher global prices and the weak won. Korea Zinc, one of the world’s largest non-ferrous metal producers, is particularly exposed. Silver accounts for more than 30 percent of the company’s total revenue, surpassing even zinc, its flagship product. With ore procurement costs climbing, analysts warn that profit margins could come under mounting pressure. Wall Street expects the rally to continue. Goldman Sachs has forecast silver prices could reach $100 per troy ounce in 2026, while Citigroup projects a potential peak of up to $110, underscoring the long-term supply tightness surrounding the metal. 2026-01-02 14:47:17

KOSPI kicks off new year while most Asian markets stay closed SEOUL, January 2 (AJP) - Most Asian bourses remained closed for New Year celebrations on Friday, while South Korea's stock market opened an hour later than usual, amid expectations of reaching a new all-time high for the year. With Taiwan's TAIEX and Hong Kong's Hang Seng Index open, South Korea's benchmark KOSPI opened higher, up 0.57 percent at 4,238. Having already surpassed its previous intraday peak, attention now turns to whether it can close above its record high of 4,221.87. The rally is being led by retail investors, who have net purchased 110.6 billion Korean won (US$76.7 million) worth of shares. In contrast, foreign and institutional investors have offloaded 81 billion won and 35 billion won, respectively. Blue-chip stocks gained ground across the board. Samsung Electronics rose 2.6 percent to 123,000 won, continuing its record-breaking streak, while SK hynix posted a more modest gain of 0.8 percent to trade at 657,000 won. The semiconductor sector maintains its upward momentum as global demand remains robust and domestic and foreign brokerages continue to raise earnings forecasts for both tech giants. Celltrion emerged as the standout performer, surging 9.5 percent to 198,500 won. The surge followed a preliminary disclosure projecting a more than 140 percent increase in operating profit compared to the same period last year. However, some firms faced significant headwinds. Korea Zinc dropped 2.4 percent to 1,285,000 won during the morning trade following the Chinese government's announcement of export controls on silver. The move raised concerns over supply disruptions and potential margin erosion for the non-ferrous metal producer. In the currency market, the won weakened slightly against the greenback, trading at 1,440.50 per dollar. Meanwhile, Taiwan's TAIEX rose 0.4 percent to 29,050.75, with Taiwan Semiconductor Manufacturing Co. (TSMC) gaining 0.3 percent to 1,555 Taiwan dollars ($49.6). MediaTek led the gains on the index, jumping 1.75 percent to 1,455 Taiwan dollars. The Hang Seng Index opened 0.87 percent higher at 25,860, recording the strongest start among Asian markets. Heavyweight Tencent Holdings edged up 0.25 percent to 600 Hong Kong dollars ($77), while Alibaba Group gained 0.28 percent to 143 Hong Kong dollars. Tech giant Xiaomi also traded up 0.3 percent at 39.5 Hong Kong dollars. 2026-01-02 11:16:53

Stock boom, currency bust: Korea's uneven market rally may spill into 2026 SEOUL, December 31 (AJP) - Roaring stock prices and a tumbling currency defined South Korea’s financial markets in 2025 — a divergence that may persist well into next year. The benchmark KOSPI closed the year Tuesday at 4,214.17, up 75.6 percent from a year earlier, while the tech-heavy KOSDAQ jumped 37 percent to 925.47. Both far outperformed regional peers, powered by surging demand for semiconductors, shipbuilding and defense-related stocks. Chipmakers were the undisputed champions. Samsung Electronics surged 125 percent to close at 119,900 won ($82.9), while SK hynix soared 250 percent to 651,000 won. Together, the two now account for more than one-third of the KOSPI’s total market capitalization, underscoring the market’s heavy concentration in artificial intelligence–linked plays. Shipbuilders also enjoyed a banner year. Hanwha Ocean jumped 204 percent to 113,600 won, driven by its strategic alignment with U.S. industrial policy, including the acquisition of Philly Shipyard. The move has positioned the company to secure lucrative U.S. naval maintenance, repair and overhaul (MRO) contracts, alongside a strong backlog of LNG carrier orders. Defense stocks delivered similarly robust gains. Hanwha Systems rose 140.7 percent, while LIG Nex1 climbed 90.9 percent, defying earlier expectations that easing tensions in the Middle East would dampen demand. Instead, the prolonged war in Ukraine and an intensifying global arms race continued to provide strong tailwinds. “Semiconductor stocks are expected to account for more than half of the KOSPI’s projected 14 percent return in 2026,” said Lee Jae-man, a researcher at Hana Securities, adding that defense companies are also poised for further upside as the government earmarks a record share of its research and development budget for military technologies. Lee singled out Hanwha Ocean for its strengthening pricing power and expanding profit margins. Bullish outlook — with caveats Market sentiment remains broadly optimistic. Daishin Securities and NH Investment & Securities project the KOSPI could peak between 5,300 and 5,500, supported by synchronized monetary easing and fiscal stimulus across major economies. Lee Kyung-min, a strategist at Daishin, said the rally reflects a coordinated global shift toward rate cuts, suggesting the cyclical bull market could extend at least through the first half of 2026. Government-led “value-up” initiatives have also helped narrow the so-called Korea discount. Measures such as tax incentives for higher dividend payouts, tighter fiduciary duties for corporate directors, and plans to expand pension fund investment into the KOSDAQ have bolstered investor confidence. Still, risks are mounting. Analysts warn of renewed talk of an AI bubble and the possibility of a sharper-than-expected policy pivot if inflation reaccelerates. “A liquidity squeeze following the end of the global easing cycle could trigger a market correction,” Hana Securities cautioned, noting that renewed inflation pressure in the United States could quickly sour risk sentiment. Won weakness clouds the rally In stark contrast to soaring equities, the Korean won remained among the weakest major currencies. It closed the year at 1,445.4 per dollar, down nearly 9 percent from its high earlier in May. The divergence between stocks and the currency is highly unusual. “It is unprecedented for the KOSPI to break above 4,000 while the exchange rate stays entrenched above the 1,400-won level,” said Kim Hak-kyun, managing director at Shinyoung Securities. A key driver has been the surge in overseas investment by Korean residents. From January to October, net outbound investment reached a record $117.1 billion, with $17.3 billion flowing out in October alone — the largest monthly outflow on record. The wide interest-rate gap between South Korea and the United States continues to weigh on the won. While the Federal Reserve has begun easing, its policy rate of 3.75 percent still far exceeds the Bank of Korea’s 2.5 percent, limiting Seoul’s room to maneuver. The central bank remains constrained by household debt exceeding 1,000 trillion won, making rate hikes politically and economically untenable. “Unless the U.S. economy deteriorates sharply, downward pressure on the won is likely to persist,” said Moon Jung-hee, an economist at KB Kookmin Bank. Some relief may come from policy and structural developments. The government’s foreign-exchange stabilization measures and South Korea’s inclusion in the World Government Bond Index (WGBI) next April could provide a floor for the currency. “The WGBI inclusion alone could attract stable long-term inflows, potentially pulling the exchange rate back toward the low-1,400 range,” said Seo Jeong-hoon, a researcher at Hana Bank. He added that a possible policy shift at the U.S. Federal Reserve under a Trump administration more inclined toward monetary easing could give the won additional breathing room by late 2026. 2025-12-31 16:43:44

Korean Economy/Business Calendar SEOUL, December 31 (AJP) - Jan 8 (Thu) 3rd–4th Quarter 2025 Flow of Funds (Preliminary) - Bank of Korea Jan 2nd week (estimate) Q4 Results (Preliminary) - Samsung Electronics Q4 Results (Preliminary) - LG Electronics Q4 Results (Preliminary) - LG Energy Solution Jan 14 (Wed) Dec. 2025 Export and Import Price Index & Terms of Trade Index (Preliminary) - Bank of Korea Dec. 2025 Annual Employment Trends - Ministry of Data and Statistics Nov. 2025 Household Income and Expenditure Trends - Bank of Korea Jan 20 (Tue) Dec. 2025 Producer Price Index (Preliminary) - Bank of Korea Jan 22 (Thu) 4Q & 2025 GDP (Preliminary) - Bank of Korea Jan 23 (Fri) Jan. 2026 Consumer Sentiment Index - Bank of Korea Jan 4th Week (estimate) Q4 Results - SK hynix Q4 Results - Hyundai Motor & Kia Jan 27 (Tue) Jan. 2026 BSI & ESI - Bank of Korea Dec. 2025 Weighted Average Rate - Bank of Korea Jan 28 (Wed) Nov. 2025 Population Trends - Ministry of Data and Statistics Jan 30 (Fri) Dec. & 2025 Industrial Activity Trends - Ministry of Data and Statistics 2025-12-31 15:04:30

Korea's inflation holds near 2% target in 2025, but everyday prices stay close to 3% SEOUL, December 31 (AJP) - South Korea’s headline inflation remained broadly anchored near the central bank’s target in 2025, easing to a five-year low of 2.1 percent for the full year, even as households continued to face elevated price pressures in daily expenses hovering near 3 percent — a gap likely to widen further amid persistent weakness in the won. The consumer price index rose 2.3 percent in December from a year earlier, slowing slightly from the 2.4 percent pace recorded in the previous two months, according to data released Wednesday by the Ministry of Data and Statistics. For all of 2025, inflation averaged 2.1 percent, the lowest since 2020 and down from 2.3 percent in 2024, signaling a return to the government’s target range of “around 2 percent.” Everyday costs remain elevated Beneath the headline figure, pressures tied to daily living costs remained stubbornly high. Fuel prices rose 6.1 percent on year in December despite softer global oil prices, reflecting the impact of the sharply weaker won. Prices for private services — a category closely linked to household spending — hovered near 3 percent, driven largely by higher dining-out costs. Currency weakness is emerging as a key inflation risk heading into next year. The won has traded at crisis-era levels, pushing up import prices and raising the likelihood of further pass-through to consumer prices with a time lag. The U.S. dollar averaged 1,421.97 won in 2025 based on weekly closing rates, marking the first time the annual average has exceeded the 1,400-won threshold. Previous record lows were 1,394.97 won in 1998 during the Asian financial crisis and 1,364.38 won in 2024 amid domestic political turmoil following the martial-law episode. The exchange rate hovered near 1,480 won for much of December. Economists note that higher import costs typically take three to six months to feed through to consumer prices, suggesting upward pressure could intensify in the first half of 2026 even as headline inflation currently appears stable. Reflecting this trend, the living expenditures index climbed 2.8 percent on year, its highest reading of 2025, driven in particular by a 3.3 percent rise in food prices. Weak won lifts fuel prices despite falling oil Despite an 8.6 percent drop in Dubai crude prices — from $63.8 to $58.3 per barrel in December — domestic petroleum prices continued to rise as currency depreciation pushed up import costs. Diesel and gasoline prices jumped 10.8 percent and 5.7 percent, respectively, marking the steepest increases among manufactured goods. As of Tuesday, gasoline in Seoul stood at 1,791 won per liter, while diesel was priced at 1,697 won. By contrast, prices for automotive liquefied petroleum gas fell 6 percent on year, reflecting a more than 20 percent decline in global LPG prices as U.S. production surged in 2025. Cooking oil prices also dropped 15.5 percent, supported by a sharp increase in soybean supplies from major exporters such as the United States and Brazil. Food prices continue to weigh on households Prices for agricultural, livestock and fishery products rose 4.1 percent on year, maintaining a strong upward trend. The increase was driven by higher fertilizer import costs linked to the weak won, as well as supply disruptions from heavy rainfall and wildfires. Rice prices surged 18.2 percent due to weather-related damage, while apple prices jumped 19.6 percent after wildfires significantly reduced cultivation areas. Livestock prices also continued to climb. Imported beef prices rose 8 percent on year, while domestic beef increased 4.9 percent. On a monthly basis, imported and domestic beef prices advanced 2.7 percent and 1.7 percent, respectively, reflecting higher import costs for U.S. beef and rising feed prices. By contrast, prices for vegetables less affected by weather conditions posted broad declines, with radish prices plunging more than 30 percent on year in December. The fresh food index rose 1.8 percent from a year earlier, a marked slowdown from November, although fish and shellfish prices remained elevated, up 6.9 percent. Spending categories also reflected persistent pressure on household budgets. Prices for food and non-alcoholic beverages rose 3.6 percent, while dining and lodging costs increased 3 percent. Dining-out prices continued to climb, with raw fish prices up 4.2 percent and coffee prices rising 4.3 percent, following year-end increases in seasonal fish and coffee bean costs. 2025-12-31 09:59:25

Asian stocks end 2025 quietly as Korean chipmakers steal the spotlight SEOUL, December 30 (AJP) - Asian equities wrapped up the final trading session of 2025 mostly flat on Tuesday, while South Korean semiconductor shares closed the year in celebratory fashion, hitting fresh all-time highs. Korea’s benchmark KOSPI slipped 0.15 percent to finish at 4,214.17. Despite the modest pullback, the index logged a surge of more than 75 percent from the final trading day of last year — the strongest annual performance among major Asian stock markets. Foreign and institutional investors locked in profits ahead of year-end, net selling 472.8 billion won ($327 million) and 368.9 billion won, respectively. Retail investors absorbed the selling pressure, posting net purchases of 818.9 billion won in a final-year buying spree. The won weakened as demand for dollars rose toward year-end settlement, with the currency closing at 1,446.8 per dollar, down 12.3 won as of 4:20 p.m. The softer currency pushed bond yields higher across the curve. The three-year government bond yield rose 1.3 basis points to 2.952 percent, while the 10-year yield climbed 3.1 basis points to 3.385 percent. Semiconductor heavyweights led the market’s standout gains. SK hynix advanced 1.72 percent to 651,000 won, while Samsung Electronics added 0.33 percent to 119,900 won, with both stocks setting new all-time highs. The rally followed an upbeat outlook from Nomura Securities, which set 2026 target prices of 160,000 won for Samsung Electronics and 880,000 won for SK hynix. Shares of Hyundai Motor Group affiliates also moved higher. Hyundai Motor rose 1 percent to 296,500 won, Hyundai Mobis gained 1.77 percent to 373,000 won, and Hyundai AutoEver jumped 6.41 percent to 332,000 won, leading gains within the group. Battery-related stocks, however, underperformed. LG Energy Solution fell 3 percent to 368,500 won, weighed down by a series of contract cancellations, while rival Samsung SDI slid 2.9 percent to 269,500 won. The tech-heavy KOSDAQ underperformed regional peers, dropping 0.76 percent to 925.47, as foreign investors offloaded a net 312.3 billion won to lock in profits. Elsewhere in Asia, Japan’s Nikkei 225 slipped 0.37 percent to 50,339.48. Toyota Motor fell 0.24 percent to 3,356 yen, while Honda Motor declined 0.32 percent to 1,536 yen. Semiconductor-related stocks showed mixed performance, with Ibiden rising 1.58 percent and Disco gaining 0.88 percent, while Advantest fell 0.73 percent to 19,635 yen. Taiwan’s TAIEX also retreated, closing 0.36 percent lower at 28,707.13. Heavyweights dragged on the index, with TSMC slipping 0.65 percent to 1,520 Taiwan dollars ($48.46) and Foxconn falling 1.3 percent to 228 Taiwan dollars. MediaTek ended flat at 1,420 Taiwan dollars. Mainland Chinese markets were little changed. The Shanghai Composite finished nearly flat at 3,965.12, while the Shenzhen Composite rose 0.49 percent to 13,604.07. Hong Kong’s Hang Seng Index ended 0.6 percent higher at 25,828.25. Most regional markets close for the year after Tuesday, though mainland Chinese exchanges will continue trading through Wednesday. 2025-12-30 17:08:23

KOSPI posts world's fastest gains in 2025, but capital outflows cloud celebration SEOUL, December 30 (AJP) - South Korea emerged as the world’s best-performing equity market in 2025, with its benchmark KOSPI surging nearly 76 percent over the year. Yet the historic rally came with a paradox: while stock prices soared to record highs, outbound investment overwhelmed domestic buying, leaving the won among the weakest currencies in the region. The KOSPI closed at 4,214.17 on Dec. 30, the final trading day of the year, nearly doubling from 2,399.49 at the end of 2024. The annual gain of 75.6 percent ranks as the third-largest in the market’s history, behind only the 93 percent rally during the 1987 “three-lows” boom and the 83 percent surge in 1999 at the height of the post-IMF technology bubble. Few could have imagined such a turnaround at the start of the year. Investor confidence had been badly shaken by political turmoil following a brief declaration of martial law and the subsequent impeachment of the president. Uncertainty lingered through the first half until a snap presidential election in June began to stabilize sentiment. Optimism strengthened after President Lee Jae Myung pledged to lift the KOSPI to 5,000, injecting momentum into a market long viewed as structurally undervalued. Earlier in the year, volatility had peaked when renewed “Trump-style” tariff threats pushed the KOSPI down to 2,328.2 and the KOSDAQ to 651.3 on April 7 — their lowest levels of 2025. Foreign investors retreated sharply during that period, unloading 13.6 trillion won ($9.6 billion) worth of Korean equities in April alone. The outflows pushed the monthly average exchange rate to around 1,440 won per dollar, highlighting pressure on the currency. Sentiment began to recover only after the June election, as the new administration rolled out policies aimed at strengthening capital markets and enhancing shareholder returns. Momentum accelerated in the second half of the year. The KOSPI closed above 3,000 on June 20 for the first time in three and a half years and broke the 4,000 mark intraday on Oct. 27. On Nov. 3, it reached an all-time closing high of 4,221.87, entering uncharted territory 45 years after the index was launched. Fastest growth among major global markets With a 75.6 percent annual return, the KOSPI recorded the strongest performance among major global equity benchmarks in 2025. Japan’s Nikkei 225 rose 26.5 percent, China’s Shanghai Composite gained 18.3 percent, and Taiwan’s Taiex advanced about 25 percent over the same period. Analysts attribute Korea’s outsized rally to a combination of policy support, ample liquidity and powerful industrial tailwinds, amplified by the global boom in artificial intelligence after the market began the year deeply undervalued. Chipmakers supplying high-bandwidth memory to Nvidia and other AI leaders emerged as the biggest beneficiaries. Samsung Electronics climbed to 120,000 won for the first time intertrade, while SK Hynix more than tripled in value, hitting a record high. “The global liquidity environment remains supportive, and strong corporate earnings combined with the AI growth cycle should continue to underpin the market,” said Kim Jong-min, head of research at Samsung Securities. The tech-heavy KOSDAQ also ranked among the world’s top performers, rising 37 percent for the year. After lagging earlier in 2025, it attracted renewed foreign inflows from October, exceeding 5 trillion won. On Oct. 27, the index closed at 902.7, and on Dec. 4 — nearly a year after the martial law shock — its total market capitalization surpassed 500 trillion won for the first time. Brokerages reap windfall from rally Domestic securities firms were among the biggest beneficiaries of the bull run. According to the Financial Supervisory Service, the combined net profit of 60 brokerage houses reached 2.5 trillion won in the third quarter alone, up 60 percent from a year earlier. Their total assets stood at 908.1 trillion won as of late September, more than 20 percent higher than at the end of 2024. Korea Investment & Securities became the first domestic brokerage to surpass 2 trillion won in cumulative operating profit by the third quarter, with full-year earnings projected to reach 3 trillion won. That would place it close to Nomura Holdings’ 472 billion yen ($3.1 billion) operating profit for fiscal 2024, potentially ranking it third or fourth among Asia’s largest brokerages by earnings in 2025. A rally at home, but money flows abroad Despite the historic rise in share prices, capital flows tell a more complex story. According to Bank of Korea data, outbound portfolio investment by Korean residents surged $11.2 billion in September alone, exceeding the $9.1 billion in foreign inflows into Korean securities. Between January and October, residents invested a net $117.1 billion overseas — including $89.9 billion in equities and $27.2 billion in bonds. October alone recorded a record $17.3 billion in outflows. The scale of these movements suggests not short-term currency speculation but a structural reallocation of portfolios. In that sense, 2025 may be remembered as the year Korea’s stock market delivered its strongest performance on record — even as Korean capital increasingly chose to look abroad. 2025-12-30 16:45:53

Korea's foreign money deposits rise on weak won, BOK revises M2 definition SEOUL, December 30 (AJP) -South Korea’s resident foreign-currency deposits rose in November as companies held on to dollar and euro assets amid expectations that the won’s weakness would persist, highlighting deeper structural pressures in the currency market even as authorities revise how monetary liquidity is measured. According to the Bank of Korea, foreign-currency deposits held at domestic banks totaled $103.55 billion at the end of November, up $1.71 billion from a month earlier. Dollar-denominated deposits rose $1.96 billion, while euro deposits increased $390 million. Yen deposits fell $500 million amid weakness in the Japanese currency. The dollar strengthened to 1,470.8 late November, approaching last year's year-end high of 1,472.5 won last year amid martial-law shock. It hovered around 1,480 won throughout December before retreating to 1,440 won range from last week on dollar-selling hedging accompanied by strong verbal connection to bring down the year's closing exchange rate. The central bank said the rise in dollar holdings reflected corporate trade settlements, inflows from foreign-currency bond issuance, and temporary placements of funds set aside for external debt repayment. Euro deposits also rose on trade-related inflows. Market participants said the buildup of dollar and euro deposits points to expectations of prolonged weakness in the Korean won, rather than short-term hedging behavior. The currency’s trajectory in 2025 underscores a broader structural shift. The won traded near 1,350 per dollar in June, before weakening steadily into the 1,470 range in October and November, touching 1,472 on Dec. 9. Toward year-end, a combination of verbal intervention by authorities and hedging-related flows helped pull the exchange rate back toward the 1,440 level. The dollar closed the year at 1,445.75 won, but on an annual basis, it is projected to have averaged around 1,420 won for 2025. The previous average high of the pair was 1,394.9 won in 1998, during the Asian financial crisis and the IMF bailout period. The renewed focus on foreign-currency holdings comes as debate intensifies over whether Korea’s liquidity conditions have contributed to the won’s structural weakness. The Bank of Korea separately on Tuesday unveiled a comprehensive revision of its monetary and liquidity statistics, aimed at better reflecting financial-market realities and aligning with international standards. Under the revised framework, the central bank narrowed the definition of broad money (M2) by excluding investment fund units with high price volatility, while newly including certain short-term instruments such as issuance notes and CMA products issued by large investment banks. The revision also reorganizes institutional classifications and improves data coverage to better capture actual liquidity conditions. As a result of the methodological change, October 2025 M2 under the new standard stood at 4,056.8 trillion won, down 409.5 trillion won, or 9.2 percent, from the previous definition. The BOK said the decline reflects classification changes rather than an abrupt contraction in liquidity. Under the revised methodology, M2 growth in October stood at 5.2 percent year on year, below its long-term average, suggesting that headline money growth in recent years may have overstated underlying monetary expansion. The central bank said the new framework better distinguishes between transactional money and investment-type assets, improving the analytical usefulness of monetary indicators. Amid growing debate over whether rapid M2 growth is fueling asset inflation and foreign-exchange volatility, the central bank last month said it would revise its monetary statistics. 2025-12-30 14:30:07

UPDATE: Korea's factory output rebounds on chips, domestic front remains slack *Updated with additional information and market response SEOUL, December 30 (AJP) - South Korea’s factory output rebounded in November after two consecutive monthly contractions, supported by a sharp pickup in semiconductor production and increased facility investment linked to AI-driven chip demand, government data showed Tuesday. Mining and manufacturing output rose 0.6 percent from the previous month, reversing declines of 4.2 percent in October and 1.0 percent in September, according to the Ministry of Data and Statistics. Factory activity heavily reliant on semiconductors The rebound largely owed to a 7.5 percent jump in semiconductor output and external demand. Output for export shipments climbed 4.6 percent, while production for domestic sales fell 4.5 percent. The report went largely unnoticed by the Korean markets on their last trading day for 2025. KOSPI was 0.2 percent lower at 4,212.61 as of 11:25 a.m. and the U.S. dollar at 1,434.40 won. By sector, pharmaceutical exports surged 23.7 percent from the previous month, while semiconductor exports rose 11.7 percent. In contrast, refined petroleum exports declined 4.1 percent as the petrochemical industry remained mired in a prolonged downturn. Overall industrial production increased 0.9 percent from October, compared with a 2.7 percent drop a month earlier. Service-sector output edged up 0.7 percent, but retail sales slid 3.3 percent, reflecting persistent weakness in private consumption. Facility investment rose 1.5 percent on month, led by machinery investment. The increase was driven by higher spending on precision equipment, including semiconductor inspection tools, as chipmakers expanded capacity to meet AI-driven demand. Manufacturing shipments climbed 1.6 percent from the previous month. Semiconductor shipments surged 12.1 percent on month and 9.1 percent on year, while machinery equipment shipments rose 3.5 percent and 2.3 percent, respectively. Output of “other transport equipment,” dominated by shipbuilding, fell 12.4 percent on month but remained on an upward trajectory year on year, rising 17.3 percent, reflecting the start of full-scale deliveries of LNG carriers ordered under Qatar-related projects. Manufacturing inventories increased 0.6 percent from the previous month. Semiconductor inventories, however, plunged 42.6 percent from a year earlier, reflecting aggressive stockpiling amid fears of supply shortages driven by AI demand. By contrast, inventories of electrical equipment such as batteries rose 12.6 percent on month, while output in the sector fell 8 percent on year, signaling accumulation amid the prolonged electric-vehicle slowdown and repeated overseas order cancellations faced by LG Energy Solution. Refined petroleum inventories also climbed 9.9 percent, pointing to continued weakness in the petrochemical industry. Construction rebound masks deep structural slump Construction output rose 6.6 percent from the previous month, largely due to a higher number of working days compared with October, which included the Chuseok holiday, as well as year-end project completions. Building construction increased 9.6 percent on month, while civil engineering output fell 1.1 percent. On a yearly basis, however, the sector remained deeply depressed. Building construction dropped 16.1 percent from a year earlier, while civil engineering fell 19.7 percent, effectively wiping out nearly one-fifth of last year’s activity. The downturn reflects weak orders throughout 2024, driven by high interest rates and elevated construction costs. Construction orders continued to shrink, falling 9.2 percent on year. Civil engineering orders, including power plants and communication facilities, plunged 17.3 percent, while building orders declined 7.3 percent, pointing to ongoing disruptions in housing supply. The weakness also spilled into services. Real estate-related services, centered on brokerage activity, fell 2.4 percent as tighter debt service ratio (DSR) regulations and supply constraints weighed on transactions. This made real estate the only major service category to contract, even as overall service output rose 3 percent on year. Consumers pull back as financial activity surges Retail sales reversed course, falling 3.3 percent on month after a temporary October rebound fueled by holiday demand. Sales of non-durable goods such as food declined 4.3 percent amid rising prices, while semi-durable goods like clothing dropped 3.6 percent. Durable goods sales, including communication devices and computers, also fell 0.6 percent, following a spike in general-purpose semiconductor prices in November. By retail channel, sales at supermarkets and department stores dropped 4.8 percent and 8.3 percent on year, respectively, underscoring continued pressure on household spending. In contrast, the financial sector continued to expand on buoyant equity trading. Output in finance and insurance rose 2.2 percent from the previous month and 4.2 percent from a year earlier. The combined daily average trading value of the KOSPI and KOSDAQ reached 38 trillion won ($26.2 billion) in November, more than double the level a year earlier. Margin trading also exceeded 26 trillion won as of Nov. 28, highlighting a growing polarization in the economy — with capital increasingly concentrated in financial markets while consumption, construction and real estate remain subdued. 2025-12-30 09:30:29

Korean banks' fight for deposits deepens as rate inversion signals liquidity strain SEOUL, December 29 (AJP) - South Korean banks are raising deposit rates aggressively to stem an outflow of funds into buoyant stock markets at home and abroad, triggering an unusual inversion in short-term deposit yields and adding pressure to already strained borrowers. The competition for liquidity has pushed both lending and deposit rates higher, even as the Bank of Korea keeps its policy rate on hold. According to data released Monday by the central bank, the average interest rate on new bank loans rose 0.13 percentage point in November to 4.15 percent, reversing a three-month decline. Household loan rates climbed 0.08 percentage point to 4.32 percent, while corporate loan rates rose 0.14 percentage point to 4.10 percent. Household rates reached a seven-month high, and corporate rates turned upward for the first time in six months. Jeonse (long-term rental deposit) loan rates — closely tied to household living costs — also increased for a second straight month, rising 0.12 percentage point to 3.90 percent. Short-term rates jump as banks scramble for liquidity The upward pressure is most visible in short-term lending and deposit products, reflecting banks’ urgent need to secure liquidity. General credit loan rates jumped 0.27 percentage point to 5.46 percent, while mortgage rates rose 0.19 percentage point to 4.17 percent, their biggest November increase in four years and the first return to the 4 percent range in eight months. Banks have been raising add-on rates preemptively following the government’s Oct. 15 real estate measures, which tightened “stressed debt service ratio (DSR)” rules. At the same time, short-term market yields have climbed after the Bank of Korea maintained a hawkish tone while keeping its benchmark rate unchanged. The one-year bank bond yield rose 0.27 percentage point in November, outpacing the 0.18 percentage point increase in five-year yields. As a result, loans tied to short-term rates — especially general credit loans — saw the steepest increases. Despite rising borrowing costs, the share of fixed-rate household loans continued to fall. Fixed-rate loans accounted for 54.6 percent of household lending in November, down 1.6 percentage points from the previous month and marking a fourth consecutive decline. Within mortgage loans, the fixed-rate share dropped 3.8 percentage points to 90.2 percent, suggesting borrowers are increasingly betting on future rate cuts after perceiving that interest rates have peaked. SMEs face heavier burden as risk premiums widen Small and medium-sized enterprises are bearing a disproportionate share of the tightening. SME lending rates rose 0.18 percentage point to 4.14 percent, compared with a 0.11 percentage point rise for large corporations, whose average rate stood at 4.06 percent. The wider gap reflects rising risk premiums tied to concerns over SME creditworthiness. Bank of Korea data show that so-called “marginal firms” — companies unable to cover interest payments with operating profits — accounted for 18.0 percent of SMEs in 2024, well above the 13.7 percent recorded among large corporations. Deposit rates overtake savings banks for first time since 1998 On the funding side, deposit rates rose 0.24 percentage point to an average of 2.81 percent in November, outpacing the increase in lending rates and narrowing banks’ net interest margin on new transactions by 0.11 percentage point to 1.34 percent. A notable development is that commercial bank deposit rates have surpassed those offered by savings banks for the first time in roughly 27 years, since the 1998 Asian financial crisis. The reversal reflects sharply diverging strategies: savings banks, constrained by exposure to troubled real estate project financing and weak loan demand, have frozen or lowered rates, while major banks have raised them aggressively to prevent capital outflows. An inversion has also emerged within deposit maturities themselves. According to the Korean Statistical Information Service, the average rate on deposits with maturities under six months stood at 2.58 percent, higher than the 2.43 percent offered on deposits with maturities of two to three years — a clear signal of banks’ urgency to secure short-term funds. Funds flow accelerates from deposits to markets The liquidity squeeze is being amplified by a massive shift of household money into financial markets. Data from the Korea Financial Investment Association show inflows into public offering funds reached about 66.8 trillion won ($46.6 billion) as of Sunday, more than triple last year’s 22 trillion won. The surge underscores how capital is rapidly migrating from bank deposits into equities and investment products, intensifying competition among banks for funding and helping explain the sharp rise in short-term deposit rates. 2025-12-29 17:43:02