Journalist
Seo Hye Seung, Kim Yeon-jae
duswogmlwo77@ajupress.com
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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 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 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 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% 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 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? 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 -
The murmured question: Will Rhee become third BOK chief in second term? SEOUL, Feb. 26 (AJP) — That the Bank of Korea will keep the policy rate steady at 2.5 percent on Thursday is hardly in doubt. Whether Governor Rhee Chang-yong will still be holding the gavel beyond the April meeting is. Rhee’s four-year term ends on April 20, shortly after the next rate-setting meeting on April 10. Whether he remains in office will be decided next month. Under the Bank of Korea Act, the governor’s term may be extended once with presidential endorsement. Whether through reappointment or a new nomination, the post must be confirmed at least one month before the term expires to allow for a confirmation hearing. A BOK chief is rarely rejected, given the central bank’s legal independence. Second terms are also uncommon. Only Rhee’s predecessor, Lee Ju-yeol, and Kim Sung-hwan, who served in the 1970s, have been reappointed. Whether Rhee becomes the third remains uncertain. Supporters cite crisis management Those backing Rhee credit his steady navigation through the dramatic monetary tightening and easing cycle in the United States following the post-pandemic inflation surge. Rhee took office in April 2022, at the start of the U.S. Federal Reserve’s withdrawal of excess liquidity injected during the pandemic. Under his watch, the benchmark interest rate rose from 1.5 percent to 3.5 percent by January 2023. As inflation softened and economic growth slowed in the United States, the policy direction shifted in October 2024. Rates came down to 2.5 percent by May 2025. Since then, Rhee’s policy board has opted for caution amid conflicting variables — rising housing prices and household debt at home, shifting rate paths in the U.S. and Japan, and exchange-rate volatility. Inside the central bank, officials largely supported the approach. According to a survey conducted by the BOK labor union in December, more than 61 percent of over 1,100 respondents evaluated Rhee’s monetary policy performance positively. Many economists agreed. “Rhee delivered timely monetary policy and maintained a strong presence during moments of crisis,” said Lee Seung-hoon, an economist at Meritz Securities. Another economist, speaking on condition of anonymity, added, “He managed to keep consumer inflation near the 2 percent target despite a challenging landscape.” Expanding the central bank’s scope Rhee has also been praised for broadening the BOK’s policy outlook beyond monetary frontier. Under his tenure, the bank expanded its “Issue Notes” series, applying statistical methods to challenges ranging from housing to the impact of artificial intelligence on employment. Many of the publications are now released in English, reflecting efforts to deepen international engagement. At a meeting of the Bank for International Settlements in January 2025, Rhee said Korea’s economic challenges “cannot be addressed by monetary policy alone.” Political friction Rhee’s scholarly and outspoken style, however, has unsettled some policymakers. He was appointed in 2022 by outgoing Moon Jae-in, and his term has overlapped with the impeached president Yoon Seok Yeol. Moon and President Lee Jae Myung are of the same progressive Democratic Party. Rhee publicly questioned Lee Jae Myung's campaign proposal to institutionalize universal basic income. Last November, Lee Un-ju, a member of the Democratic Party’s supreme council and a close ally of President Lee, expressed discomfort with the BOK’s focus on social issues such as housing and unemployment. “Why does he keep focusing on irrelevant issues while being so reckless with his own duties?” she wrote on social media. “If that’s the case, he should quit as BOK governor and focus on social policy research.” Such remarks highlighted lingering political unease over Rhee’s broader policy engagement. Successor names surface Given the sensitivity of the matter, officials have remained tight-lipped as differing views emerge. Still, alternative names are being floated. According to a ruling party official who requested anonymity, Shin Hyun-song, head of research at the BIS, is being discussed as a leading candidate. Known for his nonpartisan profile and academic credentials, Shin was also a top contender when Rhee was first nominated. Other names circulating in political circles include Ha Joon-kyung, senior presidential secretary for economic growth, and Lee Seung-heon, a former senior deputy governor of the BOK. “There is a possibility of reappointment, considering that Governor Rhee has recently rolled out measures aligned with the administration’s stance,” the source said. Since last year, Rhee has introduced several initiatives seen as supportive of the government’s broader economic agenda. These include promoting the development of a won-based stablecoin and arranging a foreign exchange swap between the BOK and the National Pension Service. He has championed easing capital-region concentration as a way to address youth unemployment and promote balanced national growth — goals that closely mirror the administration’s policy priorities. 2026-02-25 15:26:08 -
KOSPI lands above 6,000 less than above 5,000 SEOUL, Feb 25 (AJP) - KOSPI, on a record-setting ride, climbed above the 6,000 mark on Wednesday, less than a month after it tested 5,000, as South Korean retail investors flooded into the red-hot market on bullish forecasts of a further run toward 8,000. As of 9:45 a.m., the KOSPI added 1.07 percent to 6,032.92, with retail buying overwhelming institutional profit-taking. After a stunning 76 percent gain last year, the benchmark has remained unfazed in 2026, soaring 41.66 percent as of Tuesday and extending its rally less than a month after topping the much-touted 5,000 milestone on Jan. 27. The KOSPI’s performance, coupled with the secondary KOSDAQ’s gain of around 26 percent so far this year, is unrivaled globally - the S&P 500 has gained 1.54 percent and the Nasdaq has slipped 0.11 percent, while Japan’s Nikkei 225 up 13.87 percent and Taiwan’s TAIEX rising 19.81 percent. Foreign investment banks have been raising their targets from 7,000 and recently to 8,000 by Nomura Securities, betting on the exceptional artificial intelligence boom driven by Korean chipmakers and component producers. Korean retail investors have shown signs of returning from overseas markets, with customer deposits for local stock investment reaching 108.29 trillion won as of Monday after topping 100 trillion won for the first time late last month. Foreign investors, meanwhile, have been taking profits, selling a net 13.8 trillion won worth of KOSPI shares so far this month, according to the Financial Supervisory Service. 2026-02-25 10:05:15 -
Korea's producer prices on mild increase in Jan on brisk chip demand SEOUL, February 24 (AJP) -South Korea’s producer prices posted mild gains in January despite a softer U.S. dollar against the won and falling fuel prices, supported by brisk chipmaking activity. According to data released by the Bank of Korea on Tuesday, the producer price index (PPI) for January stood at 122.50 (2020=100), up 0.6 percent from the previous month and 1.9 percent from a year earlier. The PPI has recorded monthly increases since September. By category, prices for agricultural, livestock and fishery products rose 0.7 percent, with agricultural products up 1.4 percent and livestock products up 0.9 percent. Manufactured goods increased 0.6 percent, driven by primary metal products, which rose 3.0 percent, and computer, electronic and optical equipment — including semiconductors — up 1.8 percent. Service prices climbed 0.7 percent, led by finance and insurance, up 4.7 percent, and transportation services, up 0.7 percent. Among individual items, prices jumped for DRAM chips (49.5 percent), pumpkins (41.4 percent), silver bullion (43.6 percent), butadiene (26.7 percent), sulfuric acid (15.9 percent), consignment brokerage fees (15.2 percent), primary refined copper products (11.0 percent), beef (6.8 percent) and flash memory (9.9 percent). Prices fell for frozen squid (19.8 percent), mixed sauces (10.4 percent), hotels (7.5 percent), gasoline (6.0 percent) and diesel (5.1 percent). The domestic supply price index, which tracks price changes including imports, rose 0.3 percent from the previous month. Raw material prices fell 0.8 percent, while intermediate goods rose 0.6 percent. The total output price index, which includes export goods along with domestic shipments, rose 1.3 percent, led by manufactured goods, up 1.8 percent, and services, up 0.7 percent. Lee Moon-hee, head of the Bank of Korea’s price statistics team, said key price factors should be closely monitored, noting that Dubai crude prices rose in February from the previous month while the won-dollar exchange rate edged down. Still, Lee said spillover effects were likely to remain limited given the nature of the items driving the increase and a decline in domestic supply prices for consumer goods. He said the rise in producer prices was largely attributable to intermediate goods such as primary metal products and semiconductors, suggesting that any pass-through to consumer prices would likely appear with a time lag. He added that consumer goods prices in the domestic supply index fell for the first time in eight months in January, since May 2025, as the Lunar New Year fell in January last year versus February this year. On U.S. tariffs, Lee said they are not directly reflected in the producer price index, as it measures price changes for goods supplied by domestic producers to the domestic market. 2026-02-24 08:36:31