Search results
1,909 results
-
International Oil Prices Exceed $110 Amid Middle East Conflict, Government Considers Exit Strategy for Price Cap The recent surge in international oil prices, driven by escalating tensions in the Middle East, has deepened the South Korean governments deliberations on an exit strategy for its oil price cap, which has been in effect for over seven months. While the price cap has successfully restrained domestic fuel prices, the rise in global oil prices above $110 per barrel complicates the timeline for ending the program.According to the Korea National Oil Corporation, the benchmark price for Brent crude oil rose to $116.72 per barrel on October 23, marking a 3.14% increase from the previous trading day and the highest level in about six months since April 29. West Texas Intermediate (WTI) also increased by 3.8% to $103.27.The recent spike in international oil prices is attributed to concerns over supply disruptions due to instability in the Middle East. Attacks on Saudi Arabian energy facilities by Houthi rebels and maritime transport uncertainties in the Strait of Hormuz have heightened fears regarding oil supply. Brent crude prices rose by 6% over the past week, while WTI increased by 2.3%.Despite the rising international oil prices, domestic fuel prices in South Korea remain stable. In the third week of October, the average price for regular gasoline was 1,856.1 won per liter, and diesel was 1,842.5 won per liter, continuing a 23-week streak of declines since the third week of May.The stability in domestic prices is largely due to the governments implementation of the oil price cap. Since introducing the cap on March 13, the government has designated maximum prices 11 times to curb domestic fuel price increases.The Ministry of Trade, Industry and Energy has frozen the 11th oil price cap, which will be in effect for four weeks starting October 17. Based on refinery supply prices, gasoline is set at 1,784 won per liter, diesel at 1,773 won, and kerosene at 1,380 won. These prices have remained unchanged for about four months since a 150 won reduction in the seventh price cap at the end of June.Recent research has confirmed the price stabilization effects of the price cap. A report from the Korea Institute for Industrial Economics and Trade analyzed 1,512 gas stations nationwide and estimated that the relative price of regular gasoline compared to premium gasoline has decreased since the implementation of the price cap.Specifically, during the first price cap period, the price was estimated to be 45.75 won lower per liter, while during the second to sixth periods, it was 165.51 won lower, and after the seventh cap, it was 239.48 won lower. This analysis compared the relative price changes of regular gasoline against premium gasoline, which is not subject to the price cap.The institute suggested that the price cap may have buffered consumer prices against increases due to rising international oil prices or accelerated the reflection of international price declines in domestic selling prices. Bank of Korea Governor Shin Hyun-song also noted during a National Assembly audit on October 23 that the price cap has been measured to reduce inflation by 0.6 percentage points.However, concerns are growing that the prolonged price cap could increase fiscal burdens. The government has allocated a total of 5.6497 trillion won for compensating oil companies for losses, including 4.2 trillion won from this years contingency fund and 1.4497 trillion won from next years budget. The amount included in next years budget is intended to settle losses incurred during the fourth quarter of this year due to the price cap.Nonetheless, the actual compensation amounts to be paid to oil companies have yet to be finalized, as the government is currently verifying the costs and appropriate margins for each company. Particularly, if domestic supply prices are kept at a certain level while international oil product prices rise, the costs to cover the price differences may increase. Conversely, ending the price cap could lead to a rise in domestic fuel prices reflecting previously suppressed international price increases, potentially burdening consumers.The conditions for reviewing the termination of the price cap proposed by the government have not yet been met. The government has outlined key conditions for considering the end of the program, including the cessation of the Middle East conflict, normalization of shipping in the Strait of Hormuz, and stabilization of international oil prices around $90 per barrel. However, as the Middle East conflict continues and shipping uncertainties in the Strait of Hormuz persist, it remains challenging to determine when the price cap might end, especially with international oil prices now exceeding $110 per barrel.Concerns regarding the prolonged price cap were also raised during the recent audit. Governor Shin remarked that while South Koreas fiscal situation is relatively sound, allowing for some continuation, he expressed doubt that it could be a long-term solution.* This article has been translated by AI. October 25, 2026 17 -
Foreign Selling Pressure and Samsung Electronics' Earnings Week: Will KOSPI Recover Above 6000? Concerns over the profitability of investments in global artificial intelligence (AI) companies and SK Groups withdrawal of its Solidigm IPO have led to continued fluctuations in the KOSPI index. This week, Samsung Electronics will hold its third-quarter earnings conference call, and SK Hynix will announce its third-quarter results. Analysts expect ongoing volatility due to macroeconomic challenges and the semiconductor sectors earnings week.According to the securities industry on the 25th, the KOSPI faced significant volatility last week due to macroeconomic issues, including rising international oil prices following renewed Middle East conflicts, increased fiscal burdens leading to interest rate hikes, and global inflation concerns. The KOSPI closed at 5550.30 on the 23rd, down 117.75 points (2.08%) from the previous week. During the same period, the KOSDAQ fell by 43.09 points (5.42%). However, considering the previous weeks decline of 14.46%, the recent drop has shown signs of stabilization.On its first trading day on the 19th, the KOSPI opened up 1.76% but fell 3.73% on the 20th due to uncertainties surrounding AI investment sustainability. It rebounded with a 3.29% increase on the 21st, driven by strong performances from SpaceX and Supermicro. The index dropped again by 3.52% on the 22nd amid global uncertainties, but rose 0.30% on the 23rd after news that SK Group had halted its Solidigm IPO review, alleviating some semiconductor uncertainties.This week, the stock market is expected to experience mixed trends due to both positive and negative factors. Notably, foreign selling has decreased, which is a positive sign. From October 19 to 23, foreign net selling amounted to 1.1021 trillion won, a 92.3% drop from the previous weeks 13.2086 trillion won. However, the halt in buying from other corporations is a negative factor. Following Samsung Electronics, SK Hynixs share buyback ended on the 21st, resulting in a weekly net purchase of only 1.4024 trillion won from other corporations.The domestic stock market is expected to focus on key events such as Israels election on the 27th, the U.S. Federal Open Market Committee (FOMC) meeting, SK Hynixs earnings announcement on the 28th, and Samsung Electronics conference call on the 29th to gauge market direction.If neither the Likud party, which advocates for the overthrow of the Iranian regime, nor the Yashar party, which emphasizes exit strategies, secures a majority in the Israeli election, the likelihood of forming a coalition government increases, raising uncertainties. In the U.S., early voting is underway in key battleground states ahead of the November 3 midterm elections. Domestically, SK Hynix and Samsung Electronics will unveil their third-quarter results and new shareholder return policies on the 28th and 29th. Resolving uncertainties is expected to ease the supply-demand imbalance in the KOSPI and attract foreign buying.A securities industry official stated, This week, the possibility of the October FOMC holding interest rates steady and the Israeli election, which will determine the direction of the Iranian conflict, are expected to be key variables affecting international oil prices and global uncertainties. Given the ongoing uncertainties surrounding major corporate earnings announcements and macroeconomic challenges, the domestic market will continue to search for direction.* This article has been translated by AI. October 25, 2026 16
-
Bank of Korea Governor Warns of Side Effects from Price Cap on Oil International oil prices remain unstable due to the ongoing war in Iran, with Brent crude nearing $120 per barrel.Since the outbreak of the conflict, the government has maintained a price cap on oil for over seven months. Given the situation in the Middle East, it seems unlikely that the price cap will end soon. However, is it truly advisable to continue this price cap indefinitely?The price cap was implemented out of concern for inflation and the cost of living. It has indeed alleviated some consumer burden by preventing the surge in international oil prices from translating into domestic inflation. Shin Hyun-sung, Governor of the Bank of Korea, acknowledged that the price cap has played a significant role in curbing inflation. But that is not the whole story.Governor Shin warned that prolonging the price cap could distort price structures, prevent demand from decreasing even when consumption should be curtailed, and increase fiscal burdens. He emphasized that while there may be short-term benefits in stabilizing prices, it cannot serve as a long-term solution.In fact, the price cap has led to unintended consequences. Gasoline consumption increased in May, July, and September compared to the previous year, a phenomenon attributed to the artificially suppressed domestic prices. This is occurring in a country that relies heavily on energy efficiency.Moreover, the price cap is not without cost. The government must compensate oil companies for their losses due to the cap, with estimates suggesting that these losses could reach 7 to 8 trillion won. Analysts argue that the 4.2 trillion won set aside by the government as a contingency fund is woefully inadequate. This cost ultimately falls on taxpayers.The price cap has also undermined the principle of beneficiary burden. Raising gasoline prices would typically mean that drivers who use their cars more would bear a greater share of the costs. However, under the price cap, this burden is shifted to everyday citizens who rely on public transportation.Continuing the price cap is not a viable option. We should not simply wait for international oil prices to stabilize at a certain level. The longer the crisis persists, the greater the fiscal burden and market distortions caused by price controls. It is essential to develop and implement an exit strategy as soon as possible. This strategy must include support measures for ordinary citizens, such as truck drivers, who are adversely affected by rising fuel costs.Implementing an exit strategy for the price cap does not equate to admitting policy failure. Rather, it is a decision to return exceptional interventions to a normal market state. The government should focus not on how much further it can suppress prices but on fine-tuning the market to restore its proper function. October 25, 2026 13
-
Europe Faces Widespread Protests Over High Inflation and Housing Crisis Europe is engulfed in large-scale protests. Citizens and youth in countries including France, Spain, Portugal, Belgium, Italy, and Albania have taken to the streets to voice their opposition to soaring inflation, housing difficulties, and inadequate public sector investment.This situation starkly illustrates the severity of the structural challenges facing European society. The root causes stem from a long-standing commitment to enhancing the European welfare system and an excessive reliance on socialist policies.The failure to reform pensions amid ongoing generational conflicts is particularly painful. Additionally, neglecting free market principles while continuing welfare programs and indiscriminately increasing regulations has led to a fiscal crisis, significantly diminishing growth potential across various industries.Recently, the Portuguese government eased rent increase caps and streamlined eviction processes for delinquent tenants, prompting strong backlash. Spain also faced large protests as it attempted pension reforms. This highlights the limits of a societal structure that has relied solely on welfare benefits while ignoring market principles.Welfare expansion and regulation-heavy policies, lacking productivity improvements, weaken national competitiveness and ultimately threaten the lives of citizens with inflation and housing crises.While large-scale protests have not erupted in South Korea, the country faces similar challenges. Local governments are competing with welfare promises that backfire, a real estate market hindered by regulations and artificial interventions, price policies dependent on corporate goodwill, and various regulations constraining businesses, all echoing the European experience. Youth employment instability and declining public sector efficiency mirror the realities in Europe.However, South Korea is currently benefiting from a booming semiconductor industry, which masks underlying economic weaknesses and structural flaws. The substantial foreign currency earnings create an illusion of a healthier economy. Yet, all celebrations must eventually come to an end, and the more extravagant the celebration, the harder it is to clean up afterward.Once the semiconductor growth, which has been a stabilizing force, ceases, the hidden crises of inflation, housing difficulties, and deteriorating public finances will erupt, leading South Korea to experience the same turmoil and regression that Europe is currently facing.More concerning is that despite possessing the advantages of K-culture and advanced industries, South Koreas diplomatic and security standing is wavering. Amid unsettling movements from North Korea, China, and Russia, South Koreas presence is diminishing. In a tense international security landscape, our voice is becoming quieter.Considering that economic strength equates to national power, it suggests that South Koreas economic resilience is not what it once was. While the semiconductor sector has inflated the economys appearance, the underlying substance is lacking. If this continues, the country cannot avoid the adverse effects of diplomatic isolation and diminished international influence.What we need now is to break free from the illusion of a semiconductor boom and objectively improve our economic fundamentals. We must boldly reform welfare policies that distribute resources indiscriminately and regulatory frameworks that distort the market, while fostering corporate investment and enhancing productivity through structural reforms.The large-scale protests in Europe are not merely distant events. If we do not expedite fundamental reforms before the golden opportunity presented by the semiconductor industry passes, Europes present could very well become our future. October 25, 2026 13
-
KEPCO bond cap revives Korea's electricity rate dilemma SEOUL, October 24 (AJP) — South Korea's long-running electricity rate debate is resurfacing as state utility Korea Electric Power Corp. (KEPCO) faces a looming borrowing limit that could constrain investment in the country's rapidly expanding power grid. KEPCO could exceed its statutory bond issuance ceiling by about 19.2 trillion won ($14.5 billion) once a temporary exemption expires at the end of 2027, according to estimates based on the utility's medium-term financial plan. Its outstanding bonds are projected to reach about 76 trillion won by the end of next year, compared with an estimated statutory ceiling of 56.8 trillion won when the normal limit returns in 2028. The problem dates back to 2021, when global fuel prices began rising faster than KEPCO was allowed to pass through to customers. The state utility buys electricity from generators and resells it to households and businesses at regulated prices, leaving it exposed when coal, liquefied natural gas and other fuel costs rise sharply. Korea introduced a fuel-cost adjustment system in 2021, but calculated increases were repeatedly withheld as the government sought to shield households and businesses from the economic effects of the COVID-19 pandemic and rising inflation. The imbalance worsened after Russia invaded Ukraine in 2022, pushing KEPCO from a consolidated operating loss of 5.8 trillion won in 2021 to a record 32.7 trillion won loss the following year. As losses mounted, KEPCO increasingly relied on bond issuance to fund operations. The Yoon Suk Yeol administration responded with a series of electricity rate increases beginning in 2022 and accelerating in 2023, including hikes of 13.1 won per kilowatt-hour in January 2023 and another 8 won in May. Lawmakers also temporarily raised KEPCO's bond issuance ceiling at the end of 2022, allowing the company to borrow up to five times its capital and reserves through 2027, while the utility launched asset sales, investment adjustments and other cost-cutting measures. Falling fuel prices, higher electricity rates and restructuring gradually restored profitability, with KEPCO's operating loss narrowing to 4.5 trillion won in 2023 before swinging to profits of 8.4 trillion won in 2024 and 13.5 trillion won last year. Its balance sheet recovered much more slowly because years of losses had already been financed largely through borrowing. In October 2024, the government raised industrial electricity rates by an average 9.7 percent but froze residential and general-use rates, citing inflation and pressure on household finances. The Lee Jae Myung administration has so far focused more on restructuring industrial tariffs than on a broad household increase, lowering some daytime industrial rates while raising evening charges and preparing regional pricing aimed at making electricity cheaper in areas closer to major power generation sources. Those changes may redistribute costs among businesses but do little by themselves to reduce KEPCO's accumulated debt, even as the utility faces rising investment needs for the power grid. KEPCO's latest long-term transmission plan calls for about 72.8 trillion won in grid investment through 2038 as semiconductor clusters, artificial intelligence data centers and wider electrification sharply increase power demand. KEPCO President Kim Dong-cheol told lawmakers this month that the company would need to discuss at least a minimal electricity rate increase with the government as grid investment continues to climb. Allowing the temporary bond ceiling to expire without sharply reducing debt could leave KEPCO above its legal borrowing limit, while extending it again would postpone rather than solve the underlying financial problem. Raising electricity rates would strengthen KEPCO's finances and help fund new infrastructure, but would also increase costs for households and businesses — the same trade-off that has defined Korea's electricity policy since the energy shock began. October 24, 2026 13 -
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 -
Korean stocks look cheap, but are they a good buy? SEOUL, October 23 (AJP) — South Korean stocks have moved back to the bargain corner after dominating the top shelf in the first half, but investors remain unconvinced they offer good value. The October crash has prompted the president to complain that Korean equities are too undervalued Korean equities. Investors, however, remain wary of how much the country’s chip earnings will be worth if global AI spending subsides. South Korea’s 12-month forward price-to-earnings ratio (PER) stood at 4.95 times as of Sept. 30, according to global index provider MSCI. Comparable ratios were 19.38 times for the United States, 18.65 times for Taiwan, 15.63 times for Japan and 10.15 times for China. The measure compares stock prices with expected earnings over the next 12 months. Seoul's figure does not capture the October rout. The KOSPI has lost 19 percent this month through Friday, while the junior KOSDAQ has fallen 12 percent. The KOSPI is nearly 40 percent below its June 22 peak. The KOSPI’s forward PER has fallen to 4.41 times from 5.43 earlier this month, according to financial data provider FnGuide — below the roughly 7 to 8 times recorded during the 2008 global financial crisis and the COVID-19 market turmoil in 2020. Yet analysts caution against treating low earnings multiples as an automatic buying signal. “By that logic, even if the KOSPI reached 11,000, it could still be considered undervalued,” said an analyst at Yuanta Securities. The unusually low ratio reflects both falling share prices and soaring earnings expectations for the country’s dominant chipmakers. Hanwha Investment & Securities raised its 2027 operating profit forecast for Samsung Electronics by 8 percent to 606 trillion won ($458.3 billion) on Oct. 6, citing higher prices and shipments of next-generation high-bandwidth memory, or HBM4. Such upgrades lower forward PERs even when share prices do not fall. When prices also retreat, the apparent discount becomes more striking. Samsung Electronics and SK hynix traded at 3.54 times and 3.18 times forward earnings, respectively, as of Thursday, according to financial data platform Stock Analysis. Taiwan Semiconductor Manufacturing Co. (TSMC) traded at 17.06 times, while U.S. memory-chip maker Micron Technology traded at 5.18 times. The gap extends beyond chips, though it is less pronounced. Hyundai Motor traded at 8.64 times forward earnings, compared with 11.03 times for Japan’s Toyota Motor. But the Yuanta analyst cautioned that different markets command different multiples. “The S&P 500 generally trades at a higher earnings multiple than the KOSPI, so you cannot simply compare SK hynix with Micron.” Even securities representing ownership in the same company can trade at different valuations. SK hynix’s American depositary receipts traded at a premium of about 43 percent to its Seoul-listed shares as of Thursday. “The valuation standards are different for companies listed in Korea and those listed in the United States,” the analyst said. “You cannot simply compare the absolute numbers.” The headline KOSPI multiple also conceals a less dramatic picture across the rest of the market. Excluding chipmakers, the index’s forward PER stands at 10.3 times, down from this year’s peak of 14.5 but close to its 20-year average of 10.4, according to Kiwoom Securities. Much of the apparent bargain therefore rests on the earnings forecasts of a handful of semiconductor companies. “The question is no longer whether the chipmakers will deliver strong earnings, but whether those profits can be sustained,” the Yuanta analyst said. Another measure offers a potentially stronger argument for undervaluation. Samsung Electronics and SK hynix both had 24-month forward price-to-book ratios (PBRs) below one, according to Yuanta. That means their current market values were below their projected net assets two years ahead. But those projections, too, depend on the profits the companies are expected to accumulate. The valuation debate ultimately returns to the durability of AI demand. Large technology companies and specialized AI infrastructure providers have poured money into data centers, servers and computing capacity. As some rely increasingly on debt, investors are questioning whether the eventual returns will justify the spending. “Companies can borrow money to invest, but eventually they have to generate enough profit to recover that investment,” the analyst said. “The question is whether that can be sustained.” Those concerns are weighing on CoreWeave, which rents out computing power for AI applications and has accumulated about $50 billion in debt. Yields on some of its bonds climbed to around 15 to 16 percent in mid-October as investors grew wary of its borrowing. The pressure extends to larger technology companies. Meta Platforms on Wednesday raised the lower end of its 2026 capital spending forecast to $135 billion from $130 billion, leaving the upper end at $145 billion. It reported negative free cash flow of $2.12 billion in the third quarter despite a 26 percent rise in revenue. For Korean chipmakers, the risk is that financing pressures eventually slow the infrastructure spending driving demand for their products. Strong current earnings are already proving insufficient to reassure investors elsewhere in the semiconductor industry. U.S. equipment maker Lam Research reported quarterly revenue and earnings above market expectations on Wednesday, yet its shares fell about 6 percent in after-hours trading as investors weighed supply-chain constraints and a weaker outlook for sales to China. Samsung Electronics and SK hynix face a similar test: record profits may do little for their valuations if investors see them as a cyclical peak. Foreign investors sold a net 11.24 trillion won ($8.4 billion) of KOSPI shares during the week of Oct. 12–16, including 8.85 trillion won in the two chipmakers, according to Koscom CHECK data. Selling continued on Friday despite a modest market rebound. Foreign investors sold a net 982.6 billion won, while institutions bought 937.7 billion won and retail investors purchased 44.9 billion won. Korea’s longstanding corporate governance concerns provide another reason to demand a discount. “In the United States, shareholders are treated as the owners of the company, and companies return value to them,” the Yuanta analyst said. In Korea, he said, decisions favoring controlling shareholders, corporate restructuring and subsidiary listings can leave investors uncertain whether rising profits will benefit them. Those concerns surfaced in the debate over a proposed U.S. listing of Solidigm, SK hynix’s NAND flash memory subsidiary. The plan drew scrutiny over the potential dilution of shareholder value through a separate listing. SK hynix said Friday it had stopped reviewing the listing, citing market conditions and share price movements. Despite the selloff, some brokerages see substantial room for recovery. Hanwha has set a 2027 KOSPI target of 8,500 within a projected range of 6,000 to 9,300. Its target implies upside of about 53 percent from Friday’s close of 5,550.30. The forecast rests on the gap between corporate profitability and share prices. The KOSPI’s projected return on equity (ROE), which measures profits relative to shareholders’ capital, stands at 25.5 percent for the next 12 months, near a record high. Yet its forward PBR was just 1.08 times as of Oct. 16. Based on historical relationships, Hanwha estimates that such profitability could justify a PBR of around two times. Current prices instead imply an ROE of about 11 percent, below the 16 percent recorded over the past year. The brokerage found that since 2005, similar periods when market-implied ROE fell below actual ROE were followed by an average KOSPI gain of 28 percent over the next year. Returns were positive in 84 percent of cases. Its 8,500 target assumes a more modest valuation recovery, with forward PBR rising to 1.32 times. Hanwha expects an initial rebound toward 7,600 by year-end, followed by more gradual gains in 2027. The Yuanta analyst said the index could eventually surpass even Hanwha’s upper projection of 9,300. But it could fall further first, making a market bottom difficult to call. The next clues will come from SK hynix’s earnings announcement on Oct. 28 and Samsung Electronics’ earnings call on Oct. 29. Investors will scrutinize their outlooks for 2027 and 2028 and any new shareholder return plans. The U.S. midterm elections on Nov. 3 could also influence expectations for fiscal policy and long-term interest rates. At home, the scope for policy to deliver a lasting valuation recovery remains contested. “Perhaps doing nothing would be more helpful,” the Yuanta analyst said, questioning the effectiveness of measures introduced this year. Governance and shareholder rights problems would take time to resolve, he added. Monetary policy offers little immediate relief. The Bank of Korea held its benchmark rate at 3.00 percent on Thursday and left the door open to further increases as inflation remains elevated. Korean stocks may look cheap against the profits analysts expect. To become a convincing bargain, investors need confidence that those profits will endure — and that shareholders will receive their share. October 23, 2026 17 -
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 -
Bank of Korea Governor Shin Hyun-sung: Return to Ultra-Low Interest Rates Unlikely Shin Hyun-sung, Governor of the Bank of Korea, stated that a return to an ultra-low interest rate environment is unlikely. He emphasized the need for policy responses in preparation for a high-growth, high-interest rate environment, as the South Korean economy is expected to maintain a growth rate in the 3% range next year, following this years performance.During a National Assembly audit on October 23, Shin agreed with Democratic Party lawmaker Kim Tae-nyeon’s assertion that it would be difficult to revert to the ultra-low interest rates of the past.When Kim argued that economic policies should be based on the premise of prolonged high interest rates rather than solely expecting a decline in rates, Shin reiterated his agreement. He stated, “We will implement policies effectively in preparation for a future of high growth and high interest rates.”Shin maintained an optimistic outlook on future growth. In response to a question from Democratic Party lawmaker Oh Gi-hyung regarding the likelihood of next years economic growth rate exceeding the Bank of Koreas August forecast of 2.9% and entering the 3% range, Shin replied, “Yes.”He did not provide specific figures for this years growth rate forecast but noted that the Organization for Economic Cooperation and Development (OECD) has raised its growth forecast for South Korea to 3.7%, indicating a stronger growth trend than previously anticipated.Regarding the potential rebound of the potential growth rate, he described it as “a very important inflection point.” The Bank of Korea plans to release a working paper with newly estimated potential growth rates before the end of the year.Shin also left open the possibility of further strengthening of the won, stating, “I believe there is still room for the won to strengthen further.”When asked whether the won-dollar exchange rate could fall to the mid-1,200s, he did not specify a level but explained that the won was unusually undervalued earlier this year based on the effective exchange rate and is currently in a normalization process.He positively assessed the price stabilization effects of the maximum oil price system, explaining that it has helped reduce inflation by 0.6 percentage points by preventing the pass-through of rising oil prices to other goods.Considering fiscal conditions, he indicated that the system could be maintained for the time being but suggested that it is not a long-term solution, implying the need for temporary operation.Additionally, Shin emphasized the importance of coordination between fiscal and monetary policies to address economic polarization and issues faced by vulnerable borrowers. He stated, “South Korea is particularly in a situation of severe polarization,” and stressed that fiscal and monetary policies must work harmoniously to support vulnerable borrowers.* This article has been translated by AI. October 23, 2026 16
-
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 -
First Black House Speaker Possible as Democrats Aim to Retake House If the Democratic Party wins the upcoming midterm elections in November and regains control of the House of Representatives, Hakeem Jeffries (D-NY) is likely to become the first Black House Speaker in January, according to a report by The Washington Post on October 22.The report states that the Democrats need to maintain their current seats and gain just three additional ones to reclaim the majority.Recent polls also indicate a strong possibility for the Democrats to return to power.This outlook is influenced by ongoing challenges faced by the ruling Republican Party, particularly the fallout from various Trump-related issues. President Donald Trumps approval ratings have dropped to the low 30s amid persistent inflation and unstable foreign policy, creating a challenging environment for the Republicans as the midterm elections approach.The Washington Post noted that as the election nears, Jeffries real challenge is not just about making history as the first Black House Speaker but also about uniting a party that has become ideologically diverse.In interviews with 20 congressional aides and lawmakers, Jeffries is described as a strategic leader with strong communication skills. Colleagues report that he is extremely cautious and deliberative in his approach.Rep. Debbie Dingell (D-MI) stated, Hakeem makes everyone feel their opinions are respected and works hard to understand where they are coming from. He will need to be stronger when he gets to the Speakers position, and he will be.Jeffries, who hails from Brooklyn, New York, graduated from Binghamton University, earned a masters degree in public policy from Georgetown University, and graduated from New York University School of Law. He first ran for the New York State Assembly in 2000, entered the state legislature in 2006, and was elected to the U.S. House of Representatives in 2012, marking his entry into Washington politics. Although there were rumors of a potential run for New York City mayor, he focused on establishing himself in the House leadership.In 2018, he became the chair of the House Democratic Caucus, ranking fifth among House Democrats, and in 2022, he was elected as the first Black leader of the House Democrats.A close aide, speaking on condition of anonymity, described Jeffries as more consensus-oriented than any previous Speaker. Rather than pushing the party in a specific direction, he is known for his cautious style, waiting for members opinions to coalesce.This approach has also led to some discontent within the party. Notably, when two Democratic lawmakers sided with Republicans during a vote without prior coordination, calls for disciplinary action arose, but Jeffries only offered a general statement about the need for a serious response, raising concerns about party discipline.As a prominent pro-Israel figure, he faces criticism from progressive factions for not heeding calls from key supporters to halt aid to the Israeli government. While the ideological spectrum within the party has widened, Democrats are reportedly wary of the kind of pressure leadership exerted during Nancy Pelosis tenure.Moderate Rep. Adam Gray (D-CA) remarked, I do not react to those who hit my arm; my response to those who hit my arm is to endure even more.The Washington Post concluded that Jeffries success as Speaker will depend on how he manages a potentially unstable majority.* This article has been translated by AI. October 23, 2026 13
-
Bank of Korea Governor Shin Hyun-sung: Oil Price Cap Reduced Inflation but Isn't Sustainable Long-term Shin Hyun-sung, Governor of the Bank of Korea, stated on October 23 that while the oil price cap has effectively lowered consumer price inflation, it is not a sustainable long-term measure due to fiscal burdens.During a comprehensive audit session of the National Assemblys Planning and Finance Committee, Shin responded to a question from Democratic Party lawmaker Kim Nam-jun regarding the effects of the oil price cap. He noted, It has prevented the transfer of costs to other prices and is estimated to have lowered the inflation rate by about 0.6 percentage points.However, Shin expressed caution regarding the sustainability of the measure. He remarked, The issue is sustainability; how long can it last? He added, South Koreas fiscal situation is relatively sound, so there is some capacity to maintain it a bit longer, but concluded, It does not seem to be a long-term system.The government is also considering the fiscal burdens associated with extending the measure. Park Hong-keun, Minister of the Ministry of Economy and Finance, who attended the audit session, acknowledged the positive contributions of the price cap but also highlighted the fiscal burdens and increased gasoline consumption that could arise from its long-term implementation. He stated, We will discuss with relevant departments, taking into account market conditions and fiscal burdens.He further noted, This years contingency fund and next years budget have accounted for the losses incurred this year, and added, We will consult with related departments to address concerns if the system continues.* This article has been translated by AI. October 23, 2026 11
-
Bank of Korea Governor Shin Hyun-sung Raises Economic Growth Forecasts Shin Hyun-sung, Governor of the Bank of Korea, announced that he has raised the economic growth forecasts for this year and next year. He also expects the consumer price inflation rate for next year to exceed the previous estimate of 2.5%.During a comprehensive audit session of the National Assemblys Finance and Economy Committee on the 23rd, Governor Shin responded to a question from Democratic Party lawmaker Kim Nam-jun regarding the future direction of the base rate, stating, We are estimating this years and next years growth rates to be higher than the projections made at the end of August.He added, We plan to announce new forecasts after the November Monetary Policy Committee meeting, and noted that due to strong growth, inflation next year is expected to be slightly higher than the 2.5% projected at the end of August.On the previous day, the Bank of Koreas Monetary Policy Committee decided to maintain the base rate at 3.00% per annum. This decision follows two consecutive rate hikes in July and August, aimed at assessing the effects of the tightening measures.During the audit session, questions also arose regarding the ultimate level of the interest rate hike cycle. Lawmaker Kim urged, Rather than focusing on where the end point of the rate hike cycle is, please closely examine the ripple effects across various sectors of the economy given the strong growth.* This article has been translated by AI. October 23, 2026 11
-
BOJ Expected to Hold Interest Rates Steady in October Amid Inflation Concerns The Bank of Japan (BOJ) is expected to maintain its policy interest rate at the upcoming monetary policy meeting this month, as it assesses the impact of last months rate hike on the economy and inflation. However, it is likely to conclude that the underlying inflation rate, excluding temporary fluctuations, has effectively reached the target of 2%. Moving forward, the BOJ is expected to focus on stabilizing inflation to prevent it from exceeding this target, while weighing the timing of any further rate increases.According to the Nihon Keizai Shimbun (Nikkei) on October 23, the BOJ plans to keep the policy interest rate at 1.25% during its meeting on October 29-30. A BOJ official stated, Unless there is a special emergency, there will be no consecutive rate hikes. BOJ Governor Kazuo Ueda also mentioned at a press conference in Bangkok on October 16 that economic indicators related to Japan have generally moved as expected since the September meeting, and no new developments warranting a change in outlook have emerged.During this meeting, the BOJ is likely to indicate through its quarterly Economic and Price Outlook report that the underlying inflation rate has reached a level consistent with the 2% target. This underlying inflation rate is a key indicator the BOJ considers when deciding on interest rate adjustments.Hawkish policymakers advocating for rate hikes have already expressed the view that the inflation rate has reached 2%, and other members have also noted that it is around this level. Governor Ueda stated at the October 16 press conference that the underlying inflation rate is generally close to 2%, and any further increase beyond this is unacceptable. While reaching the target does not immediately trigger a rate hike, it suggests that the BOJ could act more swiftly if inflation risks rise above the target.The BOJ is monitoring inflationary pressures stemming from rising oil prices due to instability in the Middle East, increased demand related to artificial intelligence (AI), and the depreciation of the yen. In particular, recent increases in oil prices may lead to a rise in consumer prices, following increases in corporate transaction prices. The upcoming outlook report may revise the median forecast for core consumer price inflation, excluding fresh food, for the fiscal year 2027 upward from the previously projected 2.4%. The impact of the food consumption tax reduction, currently under review in the National Assembly, is not expected to be reflected in this forecast.December Rate Hike LikelyThe next rate hike is likely to occur in December. The BOJ has generally raised rates at six-month intervals, but this year it accelerated the pace with increases in both June and September. According to short-term financial market research firm Dotan Research, as of the afternoon of October 22, the overnight interest rate swap (OIS) market reflected a 4% probability of a rate hike in October, while Decembers probability reached approximately 80%. The market anticipates that an additional hike will occur by the January meeting at the latest.The U.S. interest rate decision also poses a variable. The U.S. Federal Reserve will hold its Federal Open Market Committee (FOMC) meeting just before the BOJ meeting on October 27-28. According to Nikkei, many market participants expect the Fed to hold rates steady this time but to raise them in December. An increase in U.S. rates could widen the interest rate gap between the U.S. and Japan, leading to a weaker yen and higher import prices, which may pressure the BOJ to raise rates further.There is also uncertainty regarding how high rates may be raised. The BOJ estimates the neutral interest rate, which neither overheats nor constrains the economy, to be between 1.1% and 2.5%. However, Governor Ueda stated on October 16 that there is no clear basis for determining the exact level of the neutral rate. In the Key Opinions from the September meeting released on October 1, one member pointed out that the neutral rate could exceed previous estimates or market expectations depending on overseas trends. This suggests that rates could surpass the previously considered upper limit of 2.5%.The BOJ has noted that financial conditions remain accommodative despite previous rate hikes, citing significant increases in bank lending. This indicates that inflationary pressures are still present. Governor Ueda also stated at the October 16 press conference, We will continue to raise the policy interest rate to adjust the degree of financial accommodation. Attention will be focused on how the BOJ evaluates inflation risks and what statements it makes regarding the timing of further rate hikes following the October 30 meeting.* This article has been translated by AI. October 23, 2026 09
-
AI Profitability and Supply Concerns Hit Market as KOSPI Falls 3.52% ◆Aju Economy Major News▷AI Profitability and Supply Concerns Hit Market... KOSPI Falls 3.52%- On October 22, the KOSPI closed at 5,533.77, down 3.52% from the previous trading day, according to the Korea Exchange. Although it attempted to rebound early in the session, it failed to maintain upward momentum, remaining below the 5,600 mark.- Large-cap semiconductor stocks led the decline, with Samsung Electronics and SK Hynix falling 4.03% and 5.49%, respectively. This drop was attributed to profit-taking following the previous days gains, as well as concerns over SK Hynixs plans for a dual listing of its U.S. subsidiary, Solidigm.- Supply pressures also contributed to the indexs decline. Foreign and institutional investors sold a net 399.1 billion won and 683.5 billion won, respectively, while individual investors bought a net 1.0364 trillion won, but this was not enough to prevent the index from falling.- The conclusion of share buybacks by Samsung Electronics and SK Hynix also weakened buying support. Samsung completed a 15 trillion won share buyback on October 6, while SK Hynix finished a 40 trillion won buyback on October 21.- Earnings reports from major U.S. tech companies have not fully alleviated market anxieties. Meta reported strong third-quarter results but did not provide specific guidance for capital expenditures next year. Questions remain about whether companies can sustain cash flow and profitability amid ongoing AI growth.◆Major Reports▷Rising Rates Cause Worry, Falling Rates Also Cause Concern? [Shinhan Investment Corp]- Whether rates rise or fall, stock prices decline. Investors may feel that the logic explaining the market has shifted. It is not the rates themselves that move the market, but rather the causes and pace of changes that alter their significance.- When driven by investment demand, rising rates may not be a factor for market decline but rather a selective factor distinguishing corporate performance. Companies that can generate returns exceeding the rising cost of capital (WACC) and expand future cash flows may find growth opportunities, while those with uncertain recovery capabilities may face multiple burdens. Conversely, rising rates due to supply shocks can harm corporate margins alongside inflation.- The same applies to falling rates. Gradual declines due to easing inflation and soft landings are positive, but sharp declines reflecting growth slowdowns and increased credit risks may not bode well for risk assets. If doubts about recovery translate into credit concerns, the preference for safe assets may lead to falling treasury yields while credit spreads for riskier companies widen. ◆Major Announcements After Market Close (October 22)▷Kyobo Securities announces 200 billion won capital increase... allocated to Trinique KS First Co., Ltd.▷Lotte Holdings states, Aiming for a shareholder return rate of over 35% to continue until 2029▷LG Display reports third-quarter operating profit of 250.6 billion won... down 42% year-on-year▷IPARK Hyundai Industrial Development reports third-quarter operating profit of 165.8 billion won... up 127% year-on-year◆Fund Trends (as of October 21, excluding ETFs)▷Domestic Equity: 28.902 trillion won▷Overseas Equity: 21.8 billion won ◆Key Schedule for Today (October 23)▷Japan: Consumer Price Index (September)▷Germany: Manufacturing and Services PMI (October)▷Eurozone: Manufacturing and Services PMI (October)▷UK: Retail Sales (September), Manufacturing and Services PMI (October)▷US: Manufacturing and Services PMI (October), Consumer Sentiment Index (October final)* This article has been translated by AI. October 23, 2026 08