Search results
726 results
-
South Korea's Q2 current account surplus ranks second only to China SEOUL, October 25 (AJP) - South Korea's current account surplus in the second quarter was the second largest among major economies, behind only China's, according to data compiled by the Bank of Korea and released on Sunday. Based on an analysis of International Monetary Fund (IMF) figures, the central bank said the country's current account surplus reached US$116.63 billion during the period between April and June and surpassed the combined surpluses of Germany and Japan for the first time, second only to China's $193.72 billion among 36 major economies. Germany ranked third with a surplus of $52.28 billion, followed by Japan with $50.62 billion. Their combined surplus of $102.89 billion was $13.74 billion less than South Korea's. It was the first time South Korea's surplus exceeded the combined surpluses of Germany and Japan since comparable data for all three countries became available in the first quarter of 1996. South Korea's surplus more than quadrupled from $28.39 billion a year earlier, while Germany's and Japan's surpluses grew by 11.9 percent and 5 percent, respectively. The gap between South Korea's surplus and Germany's widened to $64.35 billion, the largest since comparable records began in 1976, while the gap with Japan reached $66.01 billion, the widest since 1996. The trend continued into the third quarter, with South Korea posting a combined current account surplus of $88.19 billion in July and August, exceeding the combined $80.82 billion surplus of Germany and Japan by $7.37 billion. South Korea also narrowed the gap with China, with its second-quarter surplus amounting to 60.2 percent of China's, up sharply from 22.7 percent a year earlier and the highest ratio since the fourth quarter of 2019. The country also narrowed the gap with China, as its second-quarter surplus amounted to 60.2 percent of China's, up sharply from 22.7 percent a year earlier and the highest since the fourth quarter of 2019. The BOK attributed the surplus to a boom in semiconductor exports, which sharply boosted the country's external earnings. Semiconductors have been the main driver of the increase, buoyed by strong artificial intelligence (AI)-related demand. Semiconductor exports surged 181.6 percent from a year earlier to $113.89 billion in the second quarter, before jumping 218.7 percent to $148.02 billion in the third quarter, according to the Ministry of Data and Statistics. The strong performance has also lifted the outlook for the whole year. The IMF earlier this month projected South Korea's current account surplus at about $421.95 billion, second only to China's $863.21 billion. The BOK has also painted a rosy picture of the country's annual current account surplus, which could approach $500 billion. Despite the optimistic outlook, economists cautioned that the surplus does not necessarily reflect a broad improvement in the country's economy, saying that its heavy reliance on semiconductors leaves it vulnerable to fluctuations in global demand and prices. They warned that the record surplus, driven by export windfalls, could shrink rapidly if the AI boom loses momentum or intensifying competition pushes prices down. They stressed the need to diversify exports for more balanced and sustainable growth and to prepare for changes in the global semiconductor market as potential rivals like China's ChangXin Memory Technologies (CXMT) expand their capabilities. October 25, 2026 11 -
North Korea's growth may have exceeded BOK estimate SEOUL, October 24 (AJP) — North Korea's economy may have grown faster last year than the Bank of Korea estimated as wartime income from Russia, closer trade with China and cybercrime generated unusually strong external inflows, a U.S. expert said. Troy Stangarone, co-chair of the North Korea Economic Forum at George Washington University's Institute for Korean Studies, said at a forum in Washington on Thursday that the external economic environment facing North Korean leader Kim Jong Un was the most favorable of his rule. The Bank of Korea (BOK) estimated in July that North Korea's real gross domestic product expanded 3.5 percent in 2025, following growth of 3.7 percent in 2024 and 3.1 percent in 2023. Stangarone said the actual rate may have been higher. He argued that even if only part of the money believed to be flowing from Russia were reflected in available estimates, the sums would still represent a substantial source of income for an economy as small and closed as North Korea's. The BOK produces annual estimates of North Korea's economy because Pyongyang does not publish internationally comparable national accounts. Its calculations use information on economic activity collected by South Korean authorities and apply South Korean prices and value-added ratios, making them estimates of broad economic trends rather than conventional national accounts based on data released by the country itself. Stangarone identified North Korea's rapidly expanding relationship with Russia as one of the main reasons its economic conditions may be stronger than official estimates suggest. Pyongyang has deepened military and economic cooperation with Moscow during the war in Ukraine, providing troops and military supplies while gaining access to revenue and other forms of assistance. Stangarone said those benefits may continue even after the war ends because Russia would still need to replenish ammunition and military equipment. North Korea could continue receiving significant income from Russia for another two or three years after the conflict, he said. Closer economic ties with China and proceeds from cybercrime have also strengthened Pyongyang's access to foreign currency, according to Stangarone. The combination could help explain why North Korea's recent recovery appears relatively strong despite sanctions, limited access to foreign investment and longstanding weaknesses in domestic infrastructure. The BOK estimated that North Korean manufacturing output increased 6.6 percent in 2025, while construction grew 6.3 percent and agriculture, forestry and fisheries expanded 3.6 percent. The economy has now grown by more than 3 percent for three consecutive years after contracting 4.5 percent in 2020, 0.1 percent in 2021 and 0.2 percent in 2022. North Korea's estimated growth rate also exceeded South Korea's over the same three years, compared with South Korean growth of 1.5 percent in 2023, 2.2 percent in 2024 and 1.1 percent in 2025. The comparison, however, does not mean the North Korean economy is approaching South Korea in size or living standards. A smaller economy can post a higher percentage growth rate from a much lower base, while North Korea remains only a fraction of South Korea's economic size. The BOK estimated North Korea's nominal gross national income at 48.5 trillion won ($36.7 billion) in 2025, equivalent to just 1.8 percent of South Korea's 2,717.1 trillion won. Per capita GNI stood at an estimated 1.87 million won in the North, compared with 52.57 million won in South Korea, leaving the South's figure about 28 times larger. The central bank also cautions that its North Korean figures should not be interpreted with the same precision as statistics produced from conventional national accounts. The larger question is whether Pyongyang can turn its current influx of external income into sustainable domestic growth. Electricity, gas and water supply declined 0.4 percent in 2025 even as manufacturing and construction expanded, underscoring persistent weaknesses in the infrastructure needed to support industrial growth. Stangarone said North Korea could continue building factories and industrial facilities but would struggle to translate them into lasting increases in production without enough electricity to operate them. Pyongyang therefore faces a limited window to use the economic benefits of its ties with Russia, China and other external income sources to strengthen its productive capacity before the unusually favorable conditions begin to fade. October 24, 2026 14 -
Oil jumps to nearly 6-month high, reviving Korea's inflation risks SEOUL, October 24 (AJP) — Global oil prices surged to nearly six-month highs Friday as attacks on Saudi Arabia and mounting shipping risks around the Gulf deepened supply fears, adding fresh pressure to South Korea's inflation outlook. Brent crude futures settled at $116.72 a barrel, up $3.55, or 3.14 percent, their highest close since April 29. U.S. West Texas Intermediate crude rose $3.80, or 3.8 percent, to $103.27 a barrel. Brent gained 6 percent for the week, while WTI advanced 2.3 percent. The rally followed a series of attacks by Yemen's Iran-aligned Houthis across Saudi Arabia, including energy infrastructure, as fighting intensified between the group and a Saudi-led coalition. Saudi Aramco ordered staff to evacuate its headquarters in Dhahran on Thursday amid the escalation. Supply concerns were compounded by an oil spill detected from a tanker off the coast of Umm Al Quwain in the United Arab Emirates, while attacks and other security incidents involving commercial vessels have intensified around the Strait of Hormuz and nearby waterways. The renewed surge in energy prices spilled into U.S. financial markets, where the S&P 500 energy sector climbed 2.5 percent to a record high on Friday. Broader Wall Street indexes ended lower, with the Dow Jones Industrial Average falling 1.23 percent, the S&P 500 losing 0.52 percent and the Nasdaq Composite slipping 0.21 percent. The benchmark U.S. 10-year Treasury yield rose 3.7 basis points to 4.99 percent as persistent inflation concerns offset some of the safe-haven demand that had driven yields sharply lower a day earlier. The latest increase in crude prices comes as major economies are already grappling with renewed energy-driven inflation pressures. The U.S. Department of Energy on Friday authorized an emergency exchange of up to 400,000 barrels of crude from the Strategic Petroleum Reserve to address a supply disruption affecting Phillips 66's Lake Charles refinery in Louisiana. Germany's oil stockpiling agency has also moved to sell crude and refined products from strategic reserves, while production at two Libyan oilfields was reduced after a pipeline valve leading to the Zawiya export terminal was shut. For South Korea, which depends heavily on imported energy, the latest oil surge adds to price pressures that were already building before Friday's rally. Won-denominated import prices rose 1.7 percent in September from August and 17.6 percent from a year earlier, according to the Bank of Korea (BOK), as a sharp increase in crude prices outweighed the impact of a stronger won. Dubai crude averaged $113.71 a barrel in September, up 28.1 percent from $88.75 in August. Consumer inflation stood at 2.9 percent in September, while core inflation excluding food and energy was 2.8 percent. The BOK on Thursday kept the base rate unchanged at 3.00 percent after two consecutive increases in July and August, but said inflation was likely to remain above its 2 percent target for a considerable period. The central bank expects this year's headline inflation to remain broadly in line with its August forecast of 2.7 percent, while next year's rate is now expected to exceed the previous 2.3 percent projection. It identified global oil prices and the exchange rate among the main uncertainties surrounding the inflation outlook. Governor Shin Hyun-song said after Thursday's rate decision that the pass-through of cost pressures from rebounding oil prices was strengthening even as the won appreciated. The Monetary Policy Board said it would determine the timing and pace of any further rate increases after assessing inflation, growth and financial stability. The next rate decision is scheduled for Nov. 26, when the BOK will also release updated economic forecasts. October 24, 2026 09 -
AI halo may warm South Korean economy longer than expected SEOUL, October 23 (AJP) — The extraordinary AI windfall may be strong enough to lift South Korea’s long-term growth potential, suggesting the AI halo over Asia’s fourth-largest economy could be broader and longer-lasting than previously expected. Bank of Korea Governor Shin Hyun-song on Friday suggested the economy could be at an inflection point as the central bank prepares to reassess its underlying growth capacity. “I think this is a very important turning point,” he said during a parliamentary audit. The BOK last estimated potential growth at around 2 percent for 2024–2026 and plans to publish an updated estimate before year-end. Before the chip bonanza, expectations had increasingly pointed toward a decline into the 1 percent range. Potential growth is the pace at which an economy can sustainably expand without generating accelerating inflation. It depends on the supply of labor and capital and how efficiently they are used. Korea’s rate stood at around 5 percent in the early 2000s before slowing to the mid-3 percent range in the 2010s as contributions from all three weakened. The BOK now expects actual growth this year and next to run “well above” its August forecasts of 3.3 percent and 2.9 percent, respectively. A prolonged expansion could strengthen the case for a higher potential-growth estimate if the windfall translates into lasting investment and productivity gains. The distinction is between an economy enjoying a powerful upswing and one becoming capable of sustaining faster growth. The central bank said in May that the impact would depend on whether the semiconductor boom represented a permanent change or remained part of a cyclical upswing. The latter would have a much more limited effect on potential growth. “Historically, structural changes often become apparent only in hindsight,” said Lee Ji-ho, now a BOK deputy governor and then head of its Research Department. He cautioned that it was too early to conclude that the expansion represented such a shift. International estimates already suggest different trajectories. The Organization for Economic Co-operation and Development (OECD) estimated in June that Korea’s potential growth would decline from 1.85 percent in 2025 to 1.66 percent in 2026 and 1.52 percent in 2027. Calculations based on real GDP and output-gap forecasts in the International Monetary Fund’s (IMF) October World Economic Outlook, however, imply potential growth of about 1.94 percent in 2025, 2.14 percent in 2026 and 2.20 percent in 2027. The estimates are not directly comparable. The OECD uses a production-function approach, while the IMF figures are derived from its GDP and output-gap projections rather than published as a standalone potential-growth forecast. Timing also matters: the IMF’s October outlook incorporates a much stronger semiconductor cycle than the OECD’s June projections. The BOK combines several methods, including models of productive capacity and statistical estimates of underlying trends, rather than relying on a single measure. For Shin, productivity will ultimately determine whether the investment boom changes Korea’s long-term trajectory. “Total factor productivity itself may rise, but sustaining a higher growth rate requires further gains through innovation,” he told lawmakers. That remains an unfinished transition. A June BOK study found that generative AI reduced working time by an average of 3.8 percent, or about 1.5 hours a week. It estimated a potential productivity gain of around 1 percent if all the saved time were redirected toward productive activity. Yet the study found essentially no relationship between time saved and actual output growth. Researchers concluded that AI had reached an “efficiency stage” but not yet a “productivity stage.” Broader gains would require changes in workflows, organizational structures, task allocation and incentives. Such gains could help counter the demographic forces weighing on Korea’s growth capacity. IMF economists led by Korea mission chief Rahul Anand estimated that population aging could reduce average annual potential growth by 0.67 percentage point between 2023 and 2050, while broader AI adoption could raise it by as much as 0.44 percentage point. “Accelerating structural reforms remains crucial to boost Korea’s potential growth,” Anand said in an IMF statement last year. He called for a narrower productivity gap between large companies and smaller firms and greater use of innovation and AI. More efficient allocation of labor and capital could add another 0.22 percentage point, while greater participation by women and older workers could offset about one-fifth of the drag from aging. The BOK’s long-term simulations similarly point to productivity as the strongest lever. Higher total factor productivity growth could lift potential growth in the late 2040s by around 0.7 percentage point, compared with 0.1 to 0.2 percentage point from higher fertility. Taiwan offers an illustration of how AI demand can spread beyond export earnings. Its statistics agency expects growth of 11.05 percent in 2026 and 6.04 percent in 2027. Real private fixed capital formation is projected to rise 11.58 percent this year as AI demand drives capacity expansion across the semiconductor supply chain. The island’s central bank forecasts growth of 11.48 percent this year and 5.82 percent in 2027, with AI and high-performance computing demand supporting exports and investment while stronger wages and domestic activity underpin consumption. Those forecasts do not establish a permanent increase in potential growth. They do, however, illustrate how an export windfall can spread through investment, supply chains and household spending. For Korea, the durability of the chip halo will depend on how far those gains reach. Productivity improvements across manufacturing and services could help pull the economy away from a sub-2 percent potential-growth path. Gains concentrated in chip prices, factory utilization and a handful of large exporters would leave it more exposed when the cycle turns. The BOK’s year-end estimate will offer an official assessment of whether the boom has simply made Korea grow faster for a time — or begun to raise the speed it can sustain. October 23, 2026 17 -
AI boom may lift Korea's growth potential, BOK chief says SEOUL, October 23 (AJP) —South Korea may have to revisit its growth potential to better reflect the economy's newfound traction from AI boom, said Bank of Korea Governor Shin Hyun-song said Friday. “I think this is a very important turning point” Shin said of the country's growth potential during a parliamentary audit. South Korea’s potential growth rate — the pace at which the economy can expand without generating excessive inflation — has been estimated to have fallen below 2 percent after the economy underperformed its potential for the last four years. The Bank of Korea (BOK) plans to publish a new estimate of Korea's potential growth rate in a working paper before the end of the year. The central bank last estimated potential growth at around 2 percent for 2024 to 2026, down from around 5 percent in the early 2000s and the mid-3 percent range in the 2010s. Shin said total factor productivity (TFP), rather than labor input alone, would be critical to determining whether the recent AI and semiconductor investment boom could lift Korea's underlying growth capacity. The assessment comes as the BOK prepares to raise its forecasts for both economic growth and inflation. “We are looking at growth this year and next year as higher than our August forecasts,” Shin said. The BOK forecast in August that South Korea's economy would expand 3.3 percent in 2026 and 2.9 percent in 2027. It said after Thursday's monetary policy meeting that growth in both years would “considerably exceed” those projections, supported by strong semiconductor exports and investment and their growing spillover into domestic demand. Shin said the stronger growth outlook would also put upward pressure on next year's inflation forecast and would be reflected in the central bank's monetary policy. The BOK held the base rate at 3.00 percent on Thursday in a unanimous decision after quarter-percentage-point increases in July and August. Shin said Friday that the board would assess the effects of those two increases before deciding whether further adjustments were needed. He did not endorse market estimates that the terminal rate could reach between 3.50 percent and 3.75 percent. The central bank will release updated growth and inflation forecasts alongside its final monetary policy decision of the year on Nov. 26. Shin also said the recent appreciation of the won partly reflected an unwinding of its earlier weakness and stronger confidence in the Korean economy. Despite the gains, the won remained weaker than its historical average on a real effective exchange-rate basis, he said. Shin declined to give a specific level for the dollar-won exchange rate but said a stronger currency could help contain import prices and improve household purchasing power. He also said this year's current account surplus was likely to exceed the BOK's August forecast as semiconductor exports remained strong. On the government's petroleum price cap, Shin said the measure had lowered inflation by about 0.6 percentage point this year by limiting the pass-through of higher fuel costs to other goods and services. He said the measure had produced a significant short-term effect but should not be maintained indefinitely because prolonged price controls could distort prices and increase the fiscal burden. Shin also supported investment aimed at raising Korea's long-term growth rate while warning that permanent spending programs financed by temporary revenue could weaken fiscal sustainability. The remarks reinforced the BOK's view that stronger AI-led growth could improve Korea's longer-term economic capacity while keeping near-term inflation pressure high enough to delay any shift toward monetary easing. October 23, 2026 15 -
Bank of Korea Holds Interest Rate Steady Amid Economic Growth Concerns The Bank of Korea has decided to maintain its benchmark interest rate at 3.00% in October, following two consecutive rate hikes in July and August. This move indicates a moderation in its tightening pace. However, given stronger-than-expected economic growth and inflationary pressures, the central bank is likely to continue its tightening stance.During a monetary policy meeting on October 22, the Bank of Koreas Monetary Policy Committee unanimously agreed to keep the interest rate at 3.00%. This marks the first pause after raising the rate from 2.50% to 2.75% in July and then to 3.00% in August. The decision to hold rates steady is interpreted as a measure to assess the impact of the previous rate increases.Bank of Korea Governor Shin Hyun-song stated, By raising rates consecutively, we have gained some flexibility in our policy. We have secured the capacity to implement policies that align with domestic conditions without being swayed by market situations. He referred to the August rate hike as a necessary action, saying, This pause is the fruit of that decision.The outlook for future monetary policy remains hawkish. With growth and inflation trends proving stronger than initially expected, the need for further tightening persists. Governor Shin emphasized, Given that the growth and inflation trends are stronger than in August, we need to continue our tightening policy until we are confident that inflation stabilizes at our target level.In its economic assessment released on the same day, the Bank of Korea projected that this years and next years economic growth rates would significantly exceed the previous forecasts of 3.3% and 2.9%, respectively. In May 2024, when the Bank used the term significantly exceed in its growth rate forecast, it raised its previous estimate from 2.1% to 2.5%.Inflation forecasts are also expected to be revised upward. The Bank indicated that while this years consumer price and core inflation rates are likely to align with previous estimates of 2.7% and 2.5%, next years rates are expected to exceed the earlier projections of 2.3% and 2.5%. This is due to accumulated cost pressures combined with demand-side inflationary pressures.Analysts suggest that the decision to hold rates steady is more of a temporary adjustment to assess the effects of previous rate hikes rather than a shift in the tightening policy, leaving the door open for potential increases next month. With additional indicators such as third-quarter GDP and October consumer prices to be released, along with revised economic forecasts, the basis for determining future rate hikes is expected to become clearer.Choi Ji-wook, managing director of macro strategy at State Street Market Asia-Pacific, noted that the Bank of Korea believes the third-quarter economic growth rate will reflect continued strong performance, predicting a growth rate in the upper 0% range compared to the previous quarter.The market anticipates an additional rate hike in November. Choi stated, Despite the unanimous decision to hold rates, the accompanying statement was somewhat more hawkish than market expectations. Given the increased likelihood of upward revisions to growth and inflation forecasts, we maintain our outlook for an additional hike at the November meeting.Kim Myung-sil, a researcher at iM Investment & Securities, remarked, The key takeaway from this hawkish signal is the reaffirmation that the freeze does not signify an end to tightening, while also strengthening the upside risks to growth and inflation forecasts. We expect a 0.25 percentage point increase in the November benchmark rate.* This article has been translated by AI. October 22, 2026 17 -
Korea's chip boom draws Hong Kong investors into the bust SEOUL, October 22 (AJP) - South Korean chip stocks have brought joy and now grief to thousands of retail investors, and many in Hong Kong would sympathize. Hong Kong ranked as the second-largest source of foreign net buying in Korean listed stocks in the first eight months of 2026, behind France, with net purchases of 6.45 trillion won ($4.83 billion), according to the Financial Supervisory Service (FSS). It ranked sixth for the whole of 2025. U.S. and British investors, meanwhile, were net sellers during January-August. Easier access helped bring Hong Kong investors into a market riding an extraordinary semiconductor rally. The KOSPI gained 76 percent in 2025 and climbed another 110 percent to its June peak, driven largely by expectations of higher earnings from artificial intelligence demand. The reversal has been punishing. The KOSPI rebounded 3.29 percent to 5,735.66 on Wednesday but remained about 37 percent below its June 22 record close of 9,114.55, according to Korea Exchange data. It finished Thursday 3.5 percent lower. For Korean brokerages courting Hong Kong clients, the challenge is now to turn an appetite for two chipmakers into an investment relationship that can outlast their rally. About 3,500 Hong Kong retail investors have entered the Korean market through an account service launched by Hana Securities and its local partners in October 2025, according to the brokerage. Initially used mainly by wealthy clients, the service has since attracted ordinary retail investors. More than 90 percent of those clients’ Korean equity holdings are concentrated in Samsung Electronics and SK hynix. The two chipmakers account for roughly half of the KOSPI’s market capitalization, leaving both the benchmark and investors heavily exposed to shifts in the outlook for AI spending. An easier route into Seoul The value of Korean listed shares held by Hong Kong investors reached 44.89 trillion won at the end of August, up more than 90 percent from the end of 2025, FSS data showed. That increase reflects both new purchases and changes in the value of existing holdings. Kim Dae-jong, a professor of business administration at Sejong University, attributed the growing interest primarily to improving semiconductor earnings and expectations of further growth in AI demand. “Unlike U.S. and British investors who have been taking profits or rebalancing their portfolios, Hong Kong investors appear to be focusing on the relatively attractive valuations and growth potential of Korean semiconductor stocks,” Kim said. He cited rising memory-chip prices and demand for high-bandwidth memory, a key component in advanced AI processors, as factors supporting earnings expectations for Samsung Electronics and SK hynix. Access has also become simpler. Foreign investors once had to register with South Korean regulators and complete lengthy paperwork before opening local brokerage accounts. South Korea abolished the registration requirement in December 2023, although direct investment still required an account with a domestic brokerage. Foreign omnibus accounts allow overseas clients to trade Korean shares through their existing brokerages, removing the need for separate local accounts. Hana Securities became the first Korean brokerage to offer the service through a partnership with Hong Kong’s Emperor Securities in October 2025. It extended the service to Futu Securities, a major Hong Kong online brokerage, in July 2026. Samsung Securities also provides access through U.S.-based Interactive Brokers, which operates in Hong Kong. Mirae Asset Securities launched its MAPS stock-trading platform in June, allowing Hong Kong individuals to trade Korean equities. Shinhan Securities is preparing a similar omnibus account service with CICC International, the Hong Kong-based international arm of China International Capital Corporation. Chief Executive Lee Sun-hoon visited Hong Kong in September to discuss the partnership. “Foreign omnibus accounts have helped attract overseas capital by simplifying account-opening and trading procedures,” Kim said. He cautioned, however, that easier access alone could not explain the buying. Expectations of stronger chip earnings and further share-price gains also played an important role. Hana is now seeking to broaden its clients’ exposure to other AI-related sectors, including energy and construction. Leveraged bets amplify the swings Hong Kong’s appetite for Korean chips has extended beyond shares to products that multiply their daily returns. SK hynix shares surged about 1,600 percent from the start of 2025 to their June 2026 peak. A leveraged exchange-traded product targeting twice the stock’s daily return, managed by Hong Kong-based CSOP Asset Management, became the city’s largest ETF by assets in June. The product held more than $16.8 billion as of June 22, surpassing the $16.2 billion held by the Tracker Fund of Hong Kong, which tracks the Hang Seng Index, according to data compiled by Bloomberg. The growth has drawn scrutiny from the Bank of Korea (BOK). In its Sept. 10 monetary and credit policy report, the central bank said the combined market value of Hong Kong-listed leveraged ETFs linked to Samsung Electronics and SK hynix had increased more than twentyfold in the first half of 2026. Although the products trade in Hong Kong, their effects can reach Seoul. Financial institutions buy and sell Korean stocks or futures to manage their exposure, and adjustments to maintain targeted daily returns can add to market pressure. Kim said such rebalancing could reinforce market movements, generating additional buying as prices rise and selling as they fall. “When investment is concentrated in Samsung Electronics and SK hynix, growing leveraged bets can significantly affect short-term trading in both stocks,” he said. “Share prices can move excessively because of short-term capital flows, regardless of corporate earnings,” Kim added. “Investors and financial regulators need to watch market volatility closely.” The impact depends on the size of the funds and how financial institutions hedge their exposure, he said. Authorities in both markets have moved to contain the risks. South Korea’s Financial Services Commission raised the minimum cash deposit for retail investors in single-stock leveraged products from 10 million won to 30 million won, effective July 31. It also suspended new listings of single-stock products and tightened investor protection measures. Following regulatory guidance in Hong Kong, CSOP adopted a flexible leverage structure on Aug. 3, allowing its Korean chip-linked products to adjust exposure between 1.1 and two times daily returns instead of maintaining a fixed twofold target. The BOK has called for closer monitoring of leveraged investment and overseas products linked to Korean stocks, warning that trading abroad can create risks at home. Reasons to stay beyond chips Despite the surge in buying, Hong Kong accounted for only about 2 percent of foreign-held Korean listed equities at the end of August, up from 1.7 percent at the end of 2025, according to the FSS. A broader range of investment products is emerging. CSOP launched a KOSPI 200 ETF on June 18 and a KOSPI 200 covered-call active ETF on July 31, extending its offerings beyond individual chipmakers. But a wider menu alone may not be enough to keep investors interested as the market struggles to recover. Kim said automobiles, shipbuilding, defense, biotechnology and finance could attract more foreign capital if companies demonstrate sustainable growth and profitability. “Korean companies need to improve shareholder returns and corporate governance, while providing stable dividends and predictable management policies,” he said. Better access to corporate information would also help investors look beyond a handful of familiar names. “It is particularly important to improve transparency so global investors can easily compare Korean companies’ earnings and shareholder-return policies,” Kim said. “Financial authorities should also expand English-language disclosures and improve foreign investors’ access to information on dividends, taxes and corporate performance,” he added, calling for further improvements to omnibus account services. The chip boom brought Hong Kong investors to Seoul. Whether they stay through the bust may depend on what Korea can offer beyond its two semiconductor giants. October 22, 2026 17 -
KOSPI wipes out prior gains as BOK pauses rate hikes SEOUL, Oct. 22 (AJP) - South Korean stocks fell 3.5 percent on Thursday, wiping out the previous session's gains, as the Bank of Korea paused its rate tightening while leaving the door open to further hikes. The move added pressure to a chip rally that was already losing momentum. The benchmark KOSPI shed 201.89 points or 3.52 percent to close at 5,533.77. Samsung Electronics lost 4.0 percent and SK hynix 5.5 percent as foreigners turned net sellers again after a single day of buying. The tech-heavy KOSDAQ dropped 3.6 percent, and Japan's Nikkei 225 slid 2.7 percent. The decline came after the Bank of Korea's Monetary Policy Board, the central bank's seven-member rate-setting committee, unanimously voted to keep the base rate at 3.0 percent, following quarter-point increases in July and August. The board said inflation would likely stay above the 2 percent target for a considerable period. Governor Shin Hyun-song said the timing and pace of further hikes would depend on incoming data including third-quarter gross domestic product and consumer prices. Shin described the pause as the "fruit of hoe work," referring to a Korean proverb about fixing a problem early with a hoe to avoid having to use a spade later. He had used the same analogy to justify the rate hikes last summer. Forecasters treat the pause as a breather rather than an end to tightening. In a Seoul Economic Daily survey before the board's meeting, 18 of 20 economists and market experts expected another increase next month. The main index in Seoul opened below Wednesday's close, briefly climbed above it, then turned down around the rate announcement and touched 5,486 at its weakest. Local brokerages tied the slide to the bank's tightening message, profit-taking after Wednesday's chip-led surge, and renewed doubts over the cost of artificial intelligence (AI)-related spending after Meta Platforms' quarterly results. Samsung Electronics fell to 214,500 won (US$162.05) and SK hynix dropped to 1,223,000 won. The two chipmakers handed back most of the 5.7 percent and 5.8 percent gains each stock posted a day earlier. Foreigners net sold 113.2 billion won of shares, and institutions sold 307.2 billion won. Individual investors absorbed the selling with net purchases of 400.9 billion won. Decliners outnumbered gainers 710 to 173 on the main board. The junior KOSDAQ fell 28.66 points or 3.62 percent to 764.10. Its loss was steeper than the main board's and erased its own 1.4 percent advance from Wednesday. The won firmed against the dollar even as foreigners sold, trading at 1,323.7 per dollar, 3.8 won stronger than its previous close. The Nikkei 225 in Tokyo shed 1,713.4 points to 62,907.8, reversing Wednesday's gain. Thursday's drop leaves the main index in Seoul 41.0 percent below its 52-week high of 9,385.6. A recovery now depends on U.S. big-tech earnings, which set the tone for the chip trade, and on a November rate meeting where most forecasters expect the Bank of Korea to hike again. AJP Takeaways - The Bank of Korea held its base rate at 3.0 percent on Oct. 22 and signaled further increases after hikes in July and August, and South Korean stocks traded the signal rather than the hold. - Samsung Electronics and SK hynix gave back most of their Oct. 21 rally on Oct. 22, and foreign investors resumed net selling of South Korean stocks after one day of buying. - South Korea's chip-heavy main index fell 3.5 percent on Oct. 22, a steeper drop than the 2.7 percent slide in Japan's Nikkei 225. October 22, 2026 16 -
Bank of Korea Governor Shin Hyun-song: Difficult to Reverse Increased Fiscal Spending Shin Hyun-song, Governor of the Bank of Korea, addressed concerns on October 22 regarding the potential misalignment between the governments expansionary fiscal policy and the central banks tightening monetary policy. He emphasized that the assessment should depend on the nature of fiscal spending. However, he noted that increasing spending with temporary funds could burden fiscal soundness.During a press conference following the Monetary Policy Committee meeting, Shin stated, Even if resources are limited, if investments can enhance future growth rates, fiscal spending for investment may not conflict with monetary policy. He cautioned, however, that in the short term, it could contribute to rising prices, urging careful consideration of profitability and other factors.Shin assessed that the governments budget proposal for next year would have a limited impact on the economy and prices. He explained, The budget includes a significant amount of transfer payments, which have a fiscal multiplier of about 0.2, meaning their impact on GDP is not substantial.He further elaborated, Considering all these factors, the budgets effect on economic growth is estimated to be around 0.5 percentage points, while its impact on inflation is about 0.06 percentage points, attributing the relatively low inflation impact to the inclusion of low-multiplier items.However, he stressed the need for vigilance regarding fiscal sustainability. Shin remarked, Just because the fiscal multiplier is low does not mean we can be complacent. If ongoing expenditures arise from temporary funds, we must pay special attention to fiscal sustainability.He expressed concern that once fiscal spending is increased, it is challenging to reduce. If it leads to ongoing expenditures, there will be items that cannot be reversed, and even if we try to revert them later, it will be quite difficult, he said. When designing such expenditures, we must also consider how easily they can be reversed in the future.He added, Otherwise, concerns about fiscal sustainability may arise. I believe the fiscal authorities are closely monitoring this, and ultimately, the National Assembly must conduct a rigorous review.* This article has been translated by AI. October 22, 2026 12
-
Bank of Korea Governor Shin Hyun-sung: Won remains weaker than historical averages Bank of Korea Governor Shin Hyun-sung assessed that despite the recent decline in the won-dollar exchange rate, the value of the won remains lower than historical averages. He emphasized that a stronger won could reduce import prices and enhance household purchasing power.During a press briefing following the monetary policy decision by the Banks Monetary Policy Committee on October 22, he stated, Whether looking at the won-dollar exchange rate or the effective exchange rate, the won is currently weaker compared to previous years.He noted, The very high exchange rate seen in early summer was exceptional and abnormal, explaining that the subsequent rapid decline in the exchange rate was a process of returning to a normal situation.Shin pointed out that the long-term average of the effective exchange rate is around 101, while it was approximately 89 when the exchange rate was at 1,480 won. He indicated that the won can be considered significantly weaker based on the effective exchange rate, which measures the value of the won against the currencies of major trading partners, with higher numbers indicating a stronger won.However, he clarified that it is not necessary for the won to recover to historical average levels. Exchange rates can fluctuate above or below the long-term average depending on the situation, he explained.Shin remarked that the downward trend in the exchange rate represents a correction from the wons previous weakness, stating, While there are pros and cons to a stronger exchange rate, it clearly has the effect of suppressing import prices and enhancing household purchasing power, thereby alleviating polarization.He added, The exchange rate symbolizes trust in the economy, going beyond merely being a price variable that mediates trade. As a central bank, stabilizing the currency value is a crucial element, and we will strive to be a focal point of market confidence.Meanwhile, he confirmed that the policy for the internationalization of the won is proceeding as planned. Shin stated, The 24-hour won trading that began on July 1 is progressing well, and the offshore won settlement system that started trial operations on September 1 is functioning without issues.The offshore won settlement system is set to officially launch in January 2027. Shin noted that there has been a slight increase in trading volume in the offshore market but added, We will comprehensively assess the specific effects after actual operations begin.* This article has been translated by AI. October 22, 2026 11
-
UPDATE: Bank of Korea stands pat, bonds rally on unanimous pause *Updated with Governor Shin Hyun-song’s remarks, central bank statement, data and market response. SEOUL, October 22 (AJP) - The Bank of Korea (BOK) on Thursday kept its key rate steady at 3.00 percent to assess the effects of a half-percentage-point increase across its last two summer meetings, while maintaining a clear restrictive bias. “Since growth and inflation data appear stronger than predicted in August, we should keep up tightening policy stance,” Governor Shin Hyun-song said at a post-meeting briefing, adding the bias would remain until annual inflation rate comes down to the target range of around 2 percent. He projected that goal would be reached in 2027, indicating rates could stay above 3 percent through next year. The economy has kept up a robust growth pace on strong exports and investment, with inflation running around 3 percent, but policymakers unanimously decided to wait it out as upward price pressure from accumulated inflationary factors and downside risks to growth from geopolitical tensions coexist, according to the post-meeting statement. The BOK started lifting the key rate held at 2.50 percent since May last year in July and delivered the second in August. Government bonds rose as investors read hawkish tone from the governor. The two-year government bond yield fell 1.2 basis points to 3.771 percent, while the 10-year yield declined 1.2 basis points to 4.148 percent. The benchmark KOSPI and junior KOSDAQ both fell more than 3 percent on the prosect of higher rates. The won also remained resilient, trading at 1,323.9 per U.S. dollar. The pause follows a stronger assessment of the economy. Shin said the July and August hikes had given the central bank more room to maneuver, allowing it to focus on domestic economic conditions rather than react to market volatility. He described Thursday’s pause as “the payoff” from the BOK’s earlier preemptive tightening. Growth this year and next is expected to “substantially exceed” the BOK's August forecasts of 3.3 percent and 2.9 percent, respectively, as the semiconductor boom is expected to stretch and support exports and investment. Improving incomes should gradually broaden the recovery in consumption, the bank projected. Exports surged 83.7 percent from a year earlier in September, accelerating from 68.9 percent in August. Exports adjusted for working days more than doubled, rising 105.0 percent. The staggering external demand has yet to warm the local economy. Retail sales fell 1.8 percent from the previous month in August, while facilities investment dropped 9.5 percent and manufacturing output declined 5.1 percent. Employment rose by 113,000 from a year earlier in September, with the BOK describing job growth as modest and concentrated in services. Inflation remains a constraint on how long policymakers can wait. Consumer prices rose 2.9 percent from a year earlier in September, easing from 3.1 percent in August. Core inflation, excluding food and energy, slowed to 2.8 percent from 3.4 percent. Households’ expectations for inflation over the next year held at 2.7 percent. The bank warned that accumulated cost increases would continue to feed through to prices while demand-side pressure gradually builds, keeping inflation above its target for a considerable period. This year’s headline and core inflation rates are expected to broadly match the August forecasts of 2.7 percent and 2.5 percent. Next year, however, both are likely to exceed the previous projections of 2.3 percent and 2.5 percent, respectively. Escalating Middle East tensions are pushing up energy costs and disrupting supply chains, even as resilient artificial intelligence investment supports global growth. Financial stability concerns also argued against declaring the tightening cycle over. Household lending had turned lower as repayments of other loans outweighed new borrowing, but housing-related lending continued to grow and home-price gains in the Seoul metropolitan area had accelerated again, the bank noted. Policymakers would continue to watch the housing market and household debt closely as they weigh when, and how quickly, to raise rates further, the bank added. October 22, 2026 09 -
Seoul stocks slip despite Wall Street tech rebound SEOUL, October 22 (AJP) - Seoul stocks slipped at the open Thursday despite a tech-led rally on Wall Street, giving back a sliver of Wednesday’s sharp rebound, as investors were sidelined ahead of the Bank of Korea’s rate decision later in the day. The KOSPI lost 18.6 points, or 0.3 percent, to 5,717.1. Foreign investors stayed on the buy side with net purchases of 155.4 billion won ($117.0 million), while institutions sold a net 103.9 billion won ($78.3 million) and individuals 55.9 billion won ($42.1 million). The tech-heavy KOSDAQ fell harder, down 0.9 percent to 785.5. The pullback follows a 3.3 percent jump on Wednesday that lifted the main index in Seoul back above 5,700. The weakness ran wider than the headline figure suggests, with decliners outnumbering gainers 629 to 220. The chip pair split. Samsung Electronics held flat at 223,500 won ($168.34) and kept Wednesday’s 5.7 percent gain intact. SK hynix slipped 0.8 percent to 1,284,000 won ($967.09). Samsung Electro-Mechanics bucked the market, climbing 4.6 percent to 1,222,000 won ($920.39). LG Energy Solution led large-cap losses, down 4.1 percent at 394,500 won ($297.13). Samsung Biologics fell 3.0 percent to 1,375,000 won ($1,035.63). Hyundai Motor lost 1.8 percent to 304,000 won ($228.97). The Bank of Korea’s Monetary Policy Board, the central bank’s rate-setting committee, meets Thursday with the base rate at 3 percent after back-to-back quarter-point hikes in July and August. After the August increase, Governor Shin Hyun-song said board members’ projections pointed to roughly one more hike from the 3 percent level over the following six months. In New York on Wednesday, the Nasdaq Composite rose 1.1 percent and the Standard & Poor’s 500 (S&P 500) gained 0.6 percent. SpaceX jumped 7.8 percent after reporting its first profit since listing. Tesla rose 3.4 percent after Elon Musk signaled openness to combining the two companies, while Nvidia added 2.5 percent. In Tokyo, the Nikkei 225 edged up 0.1 percent to 64,704.5. The won weakened slightly, trading at 1,327.7 per dollar, up 0.2 won. AJP Takeaways - Foreign investors bought a net 155.4 billion won ($117.0 million) of KOSPI shares at the open on October 22, but decliners outnumbered gainers 629 to 220. - Samsung Electronics and SK hynix diverged on October 22, with Samsung Electronics flat at 223,500 won ($168.34) and SK hynix down 0.8 percent at 1,284,000 won ($967.09). - The Bank of Korea’s interest rate decision on October 22 is the next test for rate-sensitive sectors in Seoul. Tags: KOSPI, KOSDAQ, Bank of Korea, Monetary Policy Board, Shin Hyun-song, Samsung Electronics, SK hynix, Samsung Electro-Mechanics, LG Energy Solution, Samsung Biologics, Hyundai Motor, Nikkei 225, base rate, won-dollar exchange rate October 22, 2026 09 -
French Bond Yields Reach 24-Year High Amid Rising Inflation in Europe Rising inflation and fiscal instability in major European countries are increasing pressure for higher interest rates. Frances 10-year government bond yield has surged to its highest level in 24 years, while the UKs consumer price inflation has reached an 11-month high. On October 22, the International Financial Center reported that Frances 10-year bond yield hit 5.01%, surpassing 5% for the first time. This marks an 8 basis point increase from the previous trading day, reaching the highest level since 2002 during intraday trading. The yield gap between French bonds and Germanys, a key safe asset in Europe, has also widened. The difference in 10-year bond yields between France and Germany has expanded to 159.4 basis points, the first time it has exceeded 150 basis points since 2012. Concerns over fiscal health and political instability are contributing to the rise in French bond yields. As the government faces backlash over its 2027 budget proposal, which includes spending cuts, some political leaders are calling for the budgets withdrawal, increasing uncertainty in the political landscape. There are warnings that the decline in French bond prices could lead to shocks surpassing those seen during the Eurozone debt crisis. However, analysts suggest that the European Central Banks (ECB) crisis response tools are stronger than in the past, limiting the potential for a widespread crisis across the Eurozone. In the UK, inflation is also accelerating. The consumer price index (CPI) for September rose by 3.5% compared to the same month last year, marking the highest increase in 11 months. Rising gasoline prices and costs in the services sector are cited as primary contributors. As a result, financial markets anticipate that the Bank of England (BOE) will raise interest rates at its monetary policy meeting in November for the first time in nearly three years. The ongoing inflationary pressures are prompting a renewed need for monetary tightening. The trend of rising interest rates in major European countries is also reflected in the global bond market. The yield on the U.S. 10-year Treasury rose by 1 basis point to 5.12%, while German bond yields increased by 2 basis points to 3.42%. Tensions in the Middle East and concerns over rising international oil prices are exerting pressure across the bond market.* This article has been translated by AI. October 22, 2026 08
-
Korea and Taiwan reap chip bounty, but currencies split the harvest SEOUL, October 21 (AJP) — Chip powerhouses South Korea and Taiwan have been enjoying a bumper harvest, but their stock and currency markets have shared unevenly in the bounty in the second half. Samsung Electronics and SK hynix, which powered a stock-buying frenzy that nearly doubled the KOSPI earlier this year, have surrendered much of their gains. The Korean benchmark’s remaining advance is now roughly half Taiwan’s 60-percent surge. In the currency market, however, Korea has pulled ahead. The won has outpaced the Taiwan dollar since August as back-to-back Korean rate hikes coincided with exporter dollar selling. Taiwan held rates steady, while its exporters kept most of their foreign-currency proceeds unconverted. The won strengthened 2.9 won to close at 1,325.2 per dollar on Wednesday, extending its advance from 1,328.1 in the previous session. Using Tuesday’s closes for both currencies, the dollar-won rate had fallen 6.1 percent from about 1,414.5 on Aug. 6. Over the same period, the U.S. dollar rose 1.1 percent against the Taiwan dollar, from NT$32.261 to NT$32.617. The August starting point excludes most of the won’s initial recovery from its unusually weak July level, showing that its outperformance extends beyond that early rebound. Measured by changes in their U.S. dollar value, the won had gained about 8.4 percent since the end of 2025 through Tuesday, while the Taiwan dollar had lost about 3.6 percent. The divergence reflects more than the size of the two economies’ chip windfalls. It also turns on interest rates and what exporters do with the dollars they earn. The Bank of Korea raised its policy rate from 2.50 percent to 3.00 percent through consecutive quarter-point increases in July and August. Taiwan kept its discount rate at 2.00 percent through September despite higher energy costs, doubling Korea’s rate advantage to one percentage point. Taiwanese exporters received $61.96 billion in foreign-currency export proceeds in September but converted only $1.06 billion, or about 1.7 percent, into Taiwan dollars, according to central bank data cited in the figures. About $60.89 billion remained in foreign currency at receipt. Those funds can be converted later or used to repay foreign-currency debt, pay for imports and meet other overseas obligations. An export dollar earned, in other words, is not automatically a dollar sold for the local currency. “Korean exporters now seem to have greater confidence in bringing money back to the won,” ING economists wrote in an October report. The bank said the Taiwan dollar faced pressure from widening interest-rate differentials with the United States and corporate investment abroad, even as Taiwan’s trade surplus reached new highs. That distinction matters for two economies among the biggest beneficiaries of the global AI spending binge. “Heavy overseas investment by residents and foreign selling of domestic equities have recycled much of the export windfall abroad,” MUFG strategist Lee Hardman wrote in a July report. Those flows, he said, had restrained both currencies despite sharply improved external balances. The two central banks have also drawn different conclusions about how much tightening their economies need. The BOK said its July increase reflected stronger export- and investment-led growth, above-target inflation and financial stability risks. In August, it argued that another preemptive increase was needed to prevent price pressures from spreading. Taiwan’s central bank judged inflation to be contained despite rapid economic growth. In September, it raised its 2026 growth forecast to 11.48 percent but projected headline inflation of 2.03 percent this year and 1.83 percent in 2027, supporting its decision to hold rates steady. The currency contrast is sharper when measured from early July. From July 2 through Tuesday, the dollar-won rate fell 14.6 percent from 1,555.8, while the U.S. dollar rose 2.2 percent against the Taiwan dollar from NT$31.910. The comparison does not establish that higher rates alone produce a stronger currency. Overseas investment, equity flows, energy bills and expectations for U.S. monetary policy can outweigh their support. For Korea, however, higher rates and exporter conversions have been pulling in the same direction, helping sustain the won’s recovery even as enthusiasm for its chip stocks has faded. The BOK is widely expected to hold its policy rate on Thursday. A pause would leave exporter dollar selling and Korea’s external surplus in sharper focus as supports for the won, although the currency’s response will also depend on the bank’s guidance and global market conditions. October 21, 2026 17 -
Korea's producer inflation cools as chip prices retreat SEOUL, Oct. 21 (AJP) — South Korea’s producer inflation plateaued in September as weaker chip prices and a stronger won offset holiday food demand and higher utility charges. The producer price index rose 0.2 percent from August to 129.78, according to the Bank of Korea (BOK), while the annual increase slowed to 7.7 percent from 7.9 percent. August’s monthly gain was revised down to 0.1 percent from the preliminary 0.2 percent. Underlying price momentum softened. The index excluding food and energy was unchanged on month, while its annual increase slowed to 7.7 percent from 8.1 percent in August. The breakdown marked a shift from August, when energy and semiconductor prices helped drive producer inflation higher. Chip prices retreated in September, although energy costs continued to rise. Computer, electronic and optical equipment prices fell 1.7 percent from August, with semiconductor prices down 1.3 percent. Computer memory device prices dropped 11.8 percent, although DRAM prices remained 418.1 percent higher than a year earlier. The BOK said the stronger won helped lower producer prices for DRAM, flash memory and OLED panels, which are commonly priced in dollars even in domestic transactions. Food and utility costs nevertheless kept the headline index rising. Agricultural, forestry and fishery prices climbed 2.6 percent from August. Agricultural products rose 3.7 percent and livestock prices increased 2.7 percent amid holiday demand. Cabbage prices jumped 42.9 percent and beef prices rose 10.4 percent. Electricity, gas, water and waste prices increased 1.3 percent, led by a 13.4 percent rise in residential electricity prices after a summer discount under the progressive tariff system expired. Services prices edged down 0.1 percent as hotel and other tourism accommodation prices declined. The stronger currency also helped contain costs across the domestic supply chain. The domestic supply price index was unchanged from August after falling 1.3 percent the previous month. Raw-material prices rose 3.2 percent, but intermediate and final goods prices each declined 0.3 percent. Imported intermediate-goods prices fell 2.4 percent, while imported final-goods prices dropped 2.6 percent. The BOK said the figures reflected both lags in the pass-through of earlier oil-price movements and a 3.4 percent decline in the dollar-won exchange rate during September. The total output price index, which includes exports as well as domestic shipments, fell 0.1 percent for its third consecutive monthly decline. Export prices within the index dropped 0.9 percent, while industrial-product prices fell 0.4 percent. Upstream cost pressures, however, remained elevated. Coal and petroleum product prices rose 0.9 percent from August and 53.6 percent from a year earlier. Chemical product prices increased 1.0 percent on month and 17.5 percent on year. The broader energy index rose 1.3 percent and 11.4 percent, respectively. The BOK said declining international oil prices through mid-October could weigh on producer prices this month, while higher industrial city gas tariffs and fuel surcharges for air cargo and passenger flights could push in the opposite direction. Elevated intermediate-goods prices and accumulated production costs could eventually feed through to consumer inflation, it added. The mixed price picture comes a day before the BOK’s Monetary Policy Board meets Thursday, with the central bank widely expected to hold its base rate at 3.00 percent after back-to-back quarter-point increases in July and August. An AJP poll of seven economists published Monday found broad expectations for a pause this week, but most respondents anticipated further tightening. Five of the six who specified the next move expected another quarter-point increase in November. Four of the six who provided a forecast for the peak rate saw the tightening cycle topping out at 3.50 percent. October 21, 2026 08