Journalist

Kim Yeon-je
  • BOK issues verbal intervention amid near-4% slide in won since war outbreak
    BOK issues verbal intervention amid near-4% slide in won since war outbreak SEOUL, Mar 04 (AJP) - The Bank of Korea (BOK) issued a verbal intervention Wednesday, pledging a “timely” response after the Korean won briefly touched crisis-era levels around 1,500 per U.S. dollar amid escalating tensions in the Middle East and rising oil concerns. The warning came after the dollar in the offshore market climbed above the 1,500-won mark overnight — the first time since March 2007 in the aftermath of the global financial crisis. BOK Governor Rhee Chang-yong postponed his departure for Thailand, where he was scheduled to attend an International Monetary Fund conference, and instead presided over an emergency meeting at the central bank. “Volatility in financial markets — including foreign exchange, interest rates and equities — may be inevitable depending on developments in the Middle East,” the bank said in a statement after the meeting. The BOK warned it would respond to “excessive movements” that diverge from economic fundamentals and work with the government to correct any “one-sided” market bias. Seeking to calm investors, the central bank said Korea’s financial system remains liquid and that key external risk indicators — including sovereign borrowing spreads and credit default swap (CDS) premiums — remain stable. As of Tuesday, the CDS premium stood at 25.555 basis points, up 0.53 percent from the previous day. Although the premium had declined for seven consecutive trading days since Feb. 23, it remained near the psychological stability threshold of 25 basis points. By comparison, during the global financial crisis CDS spreads fluctuated around 600 basis points. As of 11:11 a.m., the Korean won traded at 1,480.30 per dollar, marking a decline of nearly 3.9 percent from its Feb. 26 close before the weekend attacks on Iran. 2026-03-04 11:32:25
  • UPDATE: Koreas factory output turns negative in Jan on reduced chip activity
    UPDATE: Korea's factory output turns negative in Jan on reduced chip activity **Additional data information added** SEOUL, Mar 04 (AJP) - South Korea’s factory output turned negative for the first time in three months in January on slower semiconductor and construction activity, underlining the fragility of the economic recovery as the year-end base effect faded. Mining and manufacturing output fell 1.3 percent in January from the previous month — the first decline since October, according to data released by the Ministry of Statistics and Data Wednesday. The downturn was driven largely by shipbuilding and semiconductor production. Output from “other transport equipment,” which includes tankers and container ships, shrank 17.8 percent from a month earlier. Semiconductors — a linchpin of the Korean economy — saw production fall 4.4 percent from the previous month and 5.2 percent from a year earlier. Reflecting the slowdown, the average capacity utilization rate for manufacturers slipped 1.4 percentage points to 71.2 percent, while inventories rose 0.2 percent during the same period. Mining and manufacturing shipments also decreased 1.4 percent from the previous month. “The growth trajectory for high-value-added products, such as High Bandwidth Memory (HBM), remains robust,” said Lee Doo-won, director general for economic trend statistics, noting that the pace of semiconductor production growth had already begun to slow since September. Domestic machinery orders edged down 0.1 percent from a year earlier. While private-sector orders rose 4.1 percent, a 53.1 percent plunge in public-sector orders — following a massive 93.2 percent surge the previous month — dragged down the overall figure. “The decline in public machinery orders in January indicates that new large-scale social overhead capital (SOC) projects have entered a lull,” Lee said. The construction sector also swung sharply lower as the year-end spending boost evaporated. Construction investment, which had jumped 12.1 percent in December, plunged 11.3 percent in January, erasing the earlier gains. “A strong base effect was at play following the push-out style of construction completions in December, as both the public and private sectors rushed to exhaust year-end budgets,” Lee added. Despite the current slump, the outlook for construction showed tentative improvement, with total orders rising 35.8 percent from a year earlier. Building orders increased 24.1 percent, while civil engineering orders — including railways — surged 70.5 percent. Still, Lee struck a cautious note, warning that first-quarter performance warrants close monitoring as the January decline came in sharper than expected. A split economic outlook Facility investment provided a bright spot – at least for now, rebounding 6.8 percent from the previous month. The recovery was led by a 41.1 percent surge in semiconductor manufacturing equipment and a 16 percent increase in automotive investment, fueled by a wave of corporate vehicle replacements at the start of the year. While the spillover of export strength into facility investment is a positive signal, the ministry remained cautious. “Uncertainty remains high regarding when the construction sector — which still faces a thin order backlog — will bottom out and rebound,” the ministry said. Economic indicators also showed a notable divergence between current conditions and future expectations. The cyclical component of the coincident composite index, which measures the present economic climate, remained unchanged at 99. In contrast, the cyclical component of the leading composite index — a gauge of future trends — rose 0.7 points to 102.3. A reading of 100 marks the threshold between expansion and contraction. The gap suggests that while optimism about a future recovery is building, the immediate reality remains challenging. “The leading index rose due to a sharp increase in exports, but it is still difficult to say the economy has fully recovered,” the ministry said, pointing to the disconnect between the two indicators. Korea’s exports in January surged 33.9 percent from a year earlier to $65.85 billion, while the monthly trade balance recorded a surplus of $8.7 billion — the 12th consecutive month in the black, according to the Ministry of Trade, Industry and Energy. However, retail sales for food and other non-durable goods — a barometer of household sentiment — plunged 5.4 percent year on year, far steeper than the 0.5 percent decline recorded the previous month. By sector, sales at supermarkets and convenience stores fell 13.8 percent, while those at large hypermarkets tumbled 20.1 percent, reflecting tightening household spending. 2026-03-04 09:48:26
  • Middle East Crisis: Brewing oil shock sparks tantrum across Seoul markets
    Middle East Crisis: Brewing oil shock sparks tantrum across Seoul markets SEOUL, Mar 03 (AJP) - Oil supply disruption following the closure of the Strait of Hormuz — the critical artery through which most Middle Eastern crude flows to Asia — is raising fears of another wave of currency volatility and fuel-driven inflation, analysts warned. Iran’s Revolutionary Guards declared the waterway shut, threatening to “set on fire” vessels entering waters bordering Iran. The strait handles roughly 20 percent of global oil supplies and about 80 percent of crude bound for Asia, including South Korea. East Asia remains heavily dependent on Middle Eastern crude. South Korea, alongside Japan, stands out for its high concentration risk and limited import diversification. According to the Korea International Trade Association (KITA), crude imports from five countries — Saudi Arabia, Kuwait, the United Arab Emirates, Qatar and Iraq — accounted for 69 percent of South Korea’s total oil imports in January. Saudi Arabia alone represented nearly half of that volume. Compounding tensions, Iran launched a drone attack on Saudi Aramco’s largest refinery in Ras Tanura. Although Saudi forces intercepted the drones and prevented severe structural damage, fires in the vicinity forced a temporary suspension of operations. Markets reacted immediately. While the UAE suspended Dubai crude trading, Brent crude futures — the global benchmark substitute — surged 8.11 percent on Sunday to $78.36 per barrel. As of 3 p.m. Tuesday, Brent climbed further to $81.24, nearly 30 percent above the $60 range where prices hovered at the start of the year. Oil prices exert a defining influence on consumer inflation. When Dubai crude surpassed $100 per barrel during the Arab Spring uprisings, South Korea’s inflation rate climbed toward 4 percent. Fuel prices are already responding. Gasoline prices in Seoul, which stood at 1,749.65 won ($1.20) per liter last Saturday, rose to 1,768.38 won by March 2 — an increase of more than 1 percent in just three days. Given the typical lag in retail price adjustments, further increases are widely expected. “A 10 percent rise in international oil prices is estimated to lift South Korea’s CPI growth by approximately 0.22 percentage points,” said Kwon Hee-jin, a researcher at KB Securities. Kwon also warned of prolonged instability, noting that unlike Venezuela’s internal collapse, Iran retains strong hardline political and military backing — raising the risk of sustained conflict. Seoul markets suffered one of their steepest declines in recent years. The KOSPI plunged 452.22 points, or 7.24 percent, to close at 5,791.91 — marking one of its sharpest single-day losses. The stock and bond markets both endured heavy selling despite Financial Services Commission Chairman Lee Eog-weon’s pledge Sunday to deploy more than 100 trillion won in market stabilization funds. The Korean won slid 2.9 percent from Friday’s close to 1,467.50 per U.S. dollar on Tuesday, reflecting intensifying capital outflows. The bond market also turned volatile. The three-year government bond yield surged 13.9 basis points to 3.180 percent, while the 10-year yield climbed 14.8 basis points to 3.594 percent — the largest increase since Jan. 20, when yields spiked following President Lee Jae Myung’s signal of a supplementary budget. The sharper rise in short-term yields relative to long-term rates suggests heightened sensitivity to inflation and exchange-rate risks, while also signaling that expectations for further Bank of Korea rate cuts are fading. Safe-haven dynamics were mixed. Gold prices surged past $5,400 per troy ounce as of Sunday, while the Dollar Index rose for three consecutive sessions to 98.42. Yet U.S. Treasury yields moved higher instead of falling, with the 10-year yield jumping 9.3 basis points to 4.036 percent overnight — reflecting investor bets that surging oil prices will reignite inflation. The Bank of Korea’s New York office noted that the likelihood of a near-term Federal Reserve rate cut has “virtually disappeared,” limiting room for the BOK to pursue its own easing cycle. “With short-term inflation expected to rise, it will be difficult for the Fed to maintain accommodative policies,” the BOK’s New York desk said, pointing to unusual weakness in U.S. Treasuries. Meritz Securities researcher Lee Seung-hoon warned that the upper bound for the U.S. 10-year yield could extend toward 4.5 percent, with Korea’s 10-year yield potentially approaching 4 percent. “Bond investors are selling on inflation sensitivity rather than rotating into safe havens,” Lee said. Some analysts, however, remain skeptical that the crisis will become protracted. “If the Strait of Hormuz remains closed for an extended period, pressure from China — one of Iran’s key economic partners — will intensify,” Lee said, predicting Iran may ultimately de-escalate. Ahn Hyun-kook, a researcher at Hanwha Investment & Securities, drew parallels to last year’s tariff escalation. “During the tariff war, President Trump stepped back when market reactions exceeded expectations,” Ahn said. “While Trump may hold leverage on tariffs, he does not control oil prices in the same way.” The Bank of Korea’s London office also assessed that high-intensity combat could conclude within one to two weeks, citing constraints on ammunition reserves on both sides — shorter than earlier projections of four to five weeks. 2026-03-03 17:34:55
  • Koreas one-winged rally: stock and economy reliant on chips
    Korea's one-winged rally: stock and economy reliant on chips SEOUL, Feb 27 (AJP) - From eye-popping KOSPI gains — more than doubling since the start of 2025 — to growth rebounding toward a potential rate of around 2 percent, South Korea’s economy appears, at first glance, to be regaining momentum. But strip away the semiconductor effect, and the underlying picture remains fragile. After an almost uninterrupted rally since year-end, the benchmark KOSPI briefly traded above 6,300 this week — only a month after celebrating the 5,000 milestone. It ended Friday at 6,244.13, taking a modest breather after a near 50 percent surge in the first two months of the year. The rally has been driven overwhelmingly by semiconductor bellwethers. Samsung Electronics is trading around 200,000 won ($141) per share, while SK hynix has crossed 1 million won ($709). Both companies are projected to post more than $100 billion in operating profit amid explosive demand for high-bandwidth memory powering artificial intelligence infrastructure. Growth upgraded — but narrowly based The semiconductor boom has lifted broader growth forecasts. The Bank of Korea (BOK) on Thursday revised up its 2026 growth estimate to 2 percent from 1.8 percent, following 1 percent growth in 2025. The IMF and OECD have also projected expansion near 2.1 percent. Yet the structure of that growth is increasingly concentrated. Excluding the IT sector, growth would slow to around 1.4 percent, according to the BOK. The growth gap between the IT sector and other industries widened from roughly 5 percentage points in the second half of 2024 to 9.5 percentage points by the third quarter of 2025. Construction investment — a key gauge of domestic demand — is projected to contract 2.1 percent this year. As high-value jobs cluster in semiconductors and other advanced manufacturing, income disparities are widening. Wages in IT manufacturing have risen since 2025, while pay levels in other sectors have stagnated or declined. The stock market reflects the same imbalance. On Wednesday, when the KOSPI broke through 6,000, Samsung Electronics rose 1.75 percent to 203,500 won and SK hynix gained 1.3 percent to 1,018,000 won. Yet nearly 60 percent of listed stocks — about 1,400 issues — declined that day. Together, Samsung Electronics and SK hynix now account for roughly 40 percent of total KOSPI market capitalization with valuation topping 2,000 trillion won. When President Lee Jae Myung took office on June 4, their combined market cap stood near 700 trillion won. Samsung Electronics on Thursday joined the exclusive $1-trillion market-cap club. Such concentration raises vulnerability concerns. “South Korean stocks could fluctuate more significantly than those of other nations in the event of a global slowdown or supply chain disruption,” the Korea Center for International Finance (KCIF) warned Friday, citing excessive semiconductor concentration in the domestic market. K-shaped growth in focus Policymakers are increasingly acknowledging the imbalance. In the BOK’s latest six-month dot plot, four out of 21 rate projections pointed to a 25-basis-point cut to 2.25 percent. While most members favored holding rates steady, the presence of easing signals suggests that some policymakers are weighing sectoral weakness beneath headline growth. “Our economy appears to be moving toward 2 percent growth based on outward indicators, but a closer look reveals the challenge of K-shaped growth,” President Lee Jae Myung said at a growth strategy meeting on Jan. 9. Governor Rhee Chang-yong noted that stagnation in non-IT sectors remains a concern. “There were arguments that the stagnation of other industries due to K-shaped growth must be taken into account,” he said, without specifying individual committee views. Economists warn that divergence between sectors could translate into deeper polarization. “The gap in economic growth leads to a gap in the stock market, which in turn widens income and asset disparities,” said Kim Gwang-suk, head of the Economic Research Office at the Korea Institute for Industrial Economics & Trade (KIET). “Support should focus on non-semiconductor industries such as agriculture and chemicals, rather than sectors that have already achieved self-sustainability.” Others argue that boosting productivity through technological innovation may offer a longer-term solution. “Physical AI — applying software intelligence to physical industrial environments — can significantly enhance productivity if implemented effectively,” said Yoo Seung-joo, professor of computer engineering at Seoul National University. Korea possesses a strong industrial base capable of adopting such solutions, said Hwang Soo-wook, a researcher at Meritz Securities, adding that broader AI deployment across manufacturing sites could narrow productivity gaps. 2026-02-27 16:33:50
  • Korean Economy/Business Calendar
    Korean Economy/Business Calendar SEOUL, Feb 27 (AJP) - Mar. 2–5 (Mon–Thu) MWC 2026 Barcelona - Over 180 Korean companies Mar. 4 (Wed) Jan. 2026 Industrial Activity Trends - Ministry of Data and Statistics Mar. 6 (Fri) Jan. 2026 Balance of Payments (Preliminary) - Bank of Korea February 2026 Consumer Price Trends - Ministry of Data and Statistics Mar. 17 (Tue) Feb. 2026 Export/Import Price & Trade Indexes (Preliminary) - Bank of Korea Mar. 18 (Wed) Feb. 2026 Employment Trends - Ministry of Data and Statistics Mar. 23 (Mon) (Mon) Q4 2025 Results - SK Inc. Mar. 24 (Tue) Feb. 2026 PPI (Preliminary) - Bank of Korea Mar. 25 (Wed) Mar. 2026 Consumer Survey Index (CSI) - Bank of Korea Mar. 31 (Tue) Feb. 2026 Industrial Activity Trends - Ministry of Data and Statistics *Major Shareholders' Annual General Meetings (AGM) Mar 18 (Wed) - Samsung Electronics Mar 20 (Fri) - Samsung Biologics - Samsung C&T - LG Energy Solution - Kia Mar 23 (Mon) - LG Electronics - NAVER Mar 24 (Tue) - POSCO Holdings - Celltrion 2026-02-27 16:11:14
  • NPS enjoys record returns on two-year KOSPI rally
    NPS enjoys record returns on two-year KOSPI rally SEOUL, February 27 (AJP) -South Korea’s National Pension Service (NPS) posted a record annual investment return of 18.82 percent in 2025 — the highest since its establishment in 1988 and outperforming major global pension peers — driven by an exceptionally strong domestic equity rally. The double-digit return generated 231.6 trillion won in earnings, nearly five times its annual pension payout of 49.7 trillion won, and lifted total assets under management to 1,458 trillion won, the fund said Thursday. The cumulative average annual return since inception reached 8.04 percent. The NPS outperformed major overseas pension funds on a calendar-year basis. Japan’s Government Pension Investment Fund returned 12.3 percent, Norway’s Government Pension Fund Global gained 15.1 percent, Canada Pension Plan Investment Board posted 7.7 percent, while the Netherlands’ ABP recorded a negative 1.6 percent return. By asset class, domestic equities delivered an exceptional 82.44 percent return, leading overall performance. Overseas equities gained 19.74 percent, domestic bonds returned 0.84 percent, overseas bonds rose 3.77 percent and alternative investments yielded 8.03 percent. The NPS attributed the sharp rise in domestic stocks to a rally in artificial intelligence- and semiconductor-related shares, along with expectations for government capital market reforms. The benchmark KOSPI index soared 75.63 percent in 2025, far outpacing the global average gain of 22 percent. Overseas equities remained resilient despite uncertainties surrounding U.S. tariff policy, supported by solid earnings from global technology companies. Domestic bonds posted modest gains following two benchmark rate cuts and signs of economic recovery. Overseas bonds also generated positive returns, benefiting from three U.S. rate cuts and declining yields amid growth concerns. Returns from alternative investments reflected valuation gains and realized profits, the fund said. NPS Chairman Kim Sung-joo said the record performance stemmed from disciplined risk management, diversified asset allocation and continued improvements in operational infrastructure, including the performance-based compensation system. “In particular, the strong rise in domestic equities contributed significantly,” Kim said, adding that the fund would further strengthen investment capabilities and pursue flexible asset allocation and regional diversification to secure stable long-term returns. The final evaluation of the 2025 fund management performance will be confirmed by the Fund Management Committee around the end of June following a review by its risk management and compensation advisory panel. Early indicators suggest momentum has carried into 2026. Market observers estimate the NPS could already be seeing returns of around 9 percent for the year to date, supported by a sharp rally in Korean equities during the first two months. Samsung Electronics on Thursday joined the $1 trillion market capitalization club, while the KOSPI has surged close to 50 percent so far this year, extending a powerful two-year rally. 2026-02-27 14:52:40
  • BOK seen on extended hold as financial risks resurface
    BOK seen on extended hold as financial risks resurface SEOUL, February 26 (AJP) - Financial stability concerns have re-emerged as the decisive variable in South Korea’s monetary policy outlook this year as inflation and economic growth return to target range. The Bank of Korea’s Monetary Policy Board on Thursday unanimously kept the benchmark rate unchanged at 2.5 percent, where it has remained since the May 2025 cut. “With inflation expected to remain stable near the target level, economic growth is projected to improve at a stronger-than-expected pace,” the BOK said in its statement. Governor Rhee Chang-yong in a post-meeting briefing shared the internal concerns over the gap between the overnight policy rate and the three-year government bond yield as “excessive,” saying rates could move higher in the second half should financial imbalances intensify. Markets interpreted the decision as extending the pause rather than preparing for tightening. The three-year government bond yield fell 5.6 basis points to 3.068 percent, while the 10-year yield declined 4.6 basis points to 3.510 percent, reflecting expectations that policy neutrality may last longer than previously thought. Improving macro conditions also lessen the rationale for further easing. The BOK revised up its 2026 growth forecast to 2.0 percent from 1.8 percent projected in November. Consumer price inflation is expected to reach 2.2 percent, broadly in line with last year’s 2.1 percent pace. The projections are consistent with outlooks from the International Monetary Fund and the OECD. If realized, the economy would be running at its estimated potential growth rate after slowing to 1.0 percent in 2025. Notably, the BOK in January removed language referencing further easing from its policy statement — a subtle but meaningful shift in forward guidance. Liquidity and leverage back in focus Thursday’s meeting placed heavy emphasis on excess liquidity and leveraged asset investment, particularly in real estate and equities. Household credit reached 1,978.8 trillion won ($1.38 trillion) in the fourth quarter of last year. Policymakers have repeatedly warned that household loans — especially property-related borrowing — have approached levels that threaten financial stability and must be reduced. The red-hot equity market has added to those concerns. The KOSPI surged 3.1 percent on Thursday, topping 6,200 a day after breaking above the 6,000 milestone, raising renewed debate over asset-price overheating. While the BOK’s six-month dot plot still assigns a higher probability to a rate cut than a hike, it effectively signals prolonged neutrality unless clearer directional signals emerge. What appears to concern policymakers most is the composition of growth. According to the BOK’s Economic Outlook report released Thursday, growth excluding the IT sector is projected at just 1.4 percent within the revised 2.0 percent headline forecast. That compares with the same 1.4 percent non-IT projection when overall growth was previously estimated at 1.8 percent. The data suggests that Korea’s recovery is becoming increasingly dependent on semiconductors and IT exports — a concentration risk that complicates policy normalization. 2026-02-26 15:19:49
  • BOK raises growth forecast for next year to 2%
    BOK raises growth forecast for next year to 2% SEOUL, Feb 26 (AJP) - The Bank of Korea (BOK) upgraded its growth forecast for 2026 economy to 2 percent next year, projecting a return to a potential growth rate after a year of sluggish performance, helped by chip-led exports strength and a recovery in construction activity. Consumer price inflation is projected to remain around 2 percent, similar to last year's levels, the central bank in its revised economic forecast released on Thursday. The growth for gross domestic product was upped to 2 percent, which would double the 1 percent growth recorded in 2025. Last year's growth was dragged down to 1 percent from an initial forecast of 1.8 percent, following a 0.3 percent contraction in the fourth quarter. The outlook for consumer price inflation remains largely unchanged. The central bank expects consumer prices to rise 2.2 percent in 2026 compared with a year earlier, a marginal increase from the 2.1 percent recorded last year. Looking further ahead, the BOK anticipates that growth will moderate to 1.8 percent in 2027. During the same period, consumer price inflation is forecast to reach 2 percent, reflecting a slight slowdown from this year's projected levels. 2026-02-26 10:17:27
  • BOK holds at 2.5% as asset inflation fuels leverage risks
    BOK holds at 2.5% as asset inflation fuels leverage risks SEOUL, February 26 (AJP) - The Bank of Korea (BOK) kept its benchmark interest rate unchanged at 2.5 percent on Thursday, extending a pause that has been in place since May last year, as surging asset prices rekindle concerns over leveraged investing and record-high household debt. The decision at the central bank’s second policy meeting of 2026 was widely expected. In January, the BOK subtly shifted its policy language, removing references that implied further easing and signaling a more cautious stance amid financial stability risks. Behind the hold lies a delicate balancing act. While growth uncertainties persist in an unpredictable global trade environment, domestic liquidity remains ample. Broad money (M2) rose 0.6 percent in December from a year earlier, underscoring a still-expansionary financial backdrop. The pressing concern for policymakers is debt. As of the fourth quarter of last year, household credit reached 1,978.8 trillion won ($1.37 trillion), up 14 trillion won from the previous quarter and edging closer to the symbolic 2,000 trillion won threshold. Despite repeated government measures to curb mortgage lending — the main driver of credit expansion — borrowing momentum has proven resilient. Capital-region housing prices remain heated, even after successive tightening steps. At the same time, equities are staging a historic surge. The KOSPI has soared roughly 42 percent in just the first two months of this year, following a 76 percent jump last year. The pace has drawn a wave of retail investors back into the market — many relying on borrowed funds. Outstanding margin loans climbed sharply from 28.7 trillion won as of Jan. 15 to 31.7 trillion won by Wednesday, reflecting aggressive leveraged positioning. Such dynamics heighten systemic sensitivity. If the Korean won were to weaken sharply again, any acceleration of foreign capital outflows could trigger forced liquidations among leveraged domestic investors, amplifying market volatility. For the moment, exchange-rate risks have moderated. The dollar, which hovered around 1,460 won in January, has retreated to the 1,430-won range in February amid a broader pullback in the U.S. currency. 2026-02-26 09:50:35
  • Up, up, up: KOSPI zooms past 6,000 — and where next?
    "Up, up, up": KOSPI zooms past 6,000 — and where next? SEOUL, Feb 25 (AJP) - It took the KOSPI three months to climb from 4,000 to 5,000 — and less than a month to zoom past 6,000. On Wednesday, the index closed at a record 6,083.86, capping one of the fastest rallies in its history. The jump is striking for a market that once waited more than a decade to reach each new four-digit milestone: 1,000 in 1989, 2,000 in 2007 and 3,000 in 2021. The index finally broke above the 4,000 on Oct. 17, and then landed above 5,000 on Jan. 27. The next 1,000-point rise was a breeze. How fast the record will be broken will be a riskier and costlier bet. Behind the rally lies an enormous pool of dry powder. As of Tuesday, investor deposits totaled 107.9 trillion won, the third-highest level on record. Money Market Funds stood at an all-time high of 235 trillion won, signaling strong institutional liquidity. But the higher the stakes, the greater the risk. The KOSPI Volatility Index (VKOSPI) rose to 49.48 on Wednesday, up more than 60 percent from the start of the year. Although below this year’s peak, the increase is unusually sharp — especially compared with the modest rise seen throughout 2025. Short-selling activity is also building. According to the Korea Financial Investment Association, outstanding stock lending balances reached about 153 trillion won as of Feb. 24, up nearly 40 trillion won since the start of the year. Such growth is often seen as a precursor to expanded short-selling. Rising lending balances suggest that more investors are positioning for potential declines after the recent surge. Leverage is another source of concern. Outstanding credit loans stood at about 32 trillion won as of Feb. 24. Investors using borrowed funds tend to focus on short-term trading, making markets more vulnerable to sudden sell-offs. If volatility triggers margin calls, forced liquidations could accelerate losses and amplify swings. “Investors’ risk appetite has increased significantly, leading to a surge in credit loan balances,” said Park Seok-hyun, an analyst at Woori Bank. “This could exacerbate market volatility.” Reflecting these risks, several brokerage firms have tightened or suspended stock-backed lending since early February. Valuation is also under scrutiny. The KOSPI’s price-to-book ratio is estimated at around 2 — high by historical standards — while return on equity has only recently reached the 9 to 10 percent range. Critics argue that this gap suggests stretched pricing. “The only other times the PBR approached this level were during the IT bubble and before the global financial crisis,” said Heo Jae-hwan, an analyst at Eugene Securities. The index’s PBR peaked at 1.87 in November 2007, shortly before the subprime mortgage crisis triggered a sharp collapse. Still, Heo downplayed the risk of a crisis-scale downturn. “The domestic market is finally shedding its long-standing undervaluation,” he said. “This is a turning point rather than a bubble.” 2026-02-25 17:34:28