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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 -
Weekly Stock Market Outlook: Focus on Semiconductor Earnings and Shareholder Returns Next week, the domestic stock market is expected to seek direction based on the earnings reports from Samsung Electronics and SK Hynix, as well as any announcements regarding additional shareholder returns. Recently, the KOSPI has experienced a sharp decline due to concerns over the profitability of AI investments and foreign selling pressure. However, analysts believe that if improvements in earnings and shareholder returns are confirmed, the supply-demand imbalance could be alleviated.According to the financial investment industry on October 23, NH Investment & Securities projected the KOSPI to range between 5,100 and 6,400 points next week. Factors contributing to potential gains include third-quarter earnings and shareholder return plans from major companies, while geopolitical risks are cited as potential downward pressures.The most anticipated events are the earnings announcements from SK Hynix on October 28 and Samsung Electronics on October 29. There is particular interest in whether additional share buybacks and shareholder return plans will be disclosed alongside the earnings reports. Given the recent decline in the KOSPI, there has been a lack of buyers to absorb the foreign selling, making shareholder returns from major semiconductor firms a potential catalyst for improving supply-demand dynamics.Na Jeong-hwan, a researcher at NH Investment & Securities, noted that the recent decline in the stock market is attributed to a lack of buyers to absorb foreign selling rather than a deterioration of fundamentals. He estimated that SK Hynixs additional shareholder return resources exceed 30 trillion won, stating, If a large-scale share buyback is confirmed, buying interest from other corporations could absorb some of the foreign selling, thereby alleviating the supply-demand imbalance in the KOSPI.The recovery of investor sentiment regarding AI investments is also a key variable. Earnings from SpaceX and Supermicro have confirmed the growing demand for AI computing and robust data center investments. Conversely, Metas transition to negative free cash flow and Teslas adjustments to its investment plans have raised concerns about whether profitability can keep pace with the scale of AI investments. Analysts suggest that confidence in the sustainability and profitability of AI investments must be established through upcoming earnings from major tech firms to ease market anxieties.Lee Kyung-min, a researcher at Daishin Securities, believes that despite the recent market adjustments, there is potential for normalization in KOSPI valuations. He analyzed that the recent sharp decline is a result of macroeconomic pressures and overlapping concerns about AI credit and profitability rather than a deterioration of fundamentals. He emphasized that next week’s major tech earnings will be crucial in reinforcing confidence in the sustainability and profitability of AI investments.U.S. monetary policy and international oil prices are also expected to influence market direction. The Federal Open Market Committee (FOMC) meeting is scheduled for October 29, with the market closely watching not only the decision on interest rates but also the future trajectory of monetary policy. Continued inflationary pressures due to high oil prices could hinder a market rebound if the Federal Reserve strengthens its tightening stance. Additionally, ongoing geopolitical instability in the Middle East could keep international oil prices elevated, potentially weighing on investor sentiment.Ultimately, next week’s stock market will be influenced by both individual corporate factors, such as semiconductor earnings and shareholder returns, and macroeconomic variables like interest rates and oil prices. If improvements in earnings are confirmed and additional shareholder returns can absorb foreign selling, the supply-demand imbalance may ease. However, ongoing doubts about AI investment profitability and geopolitical uncertainties could continue to drive volatility.* This article has been translated by AI. October 24, 2026 08 -
Interest Rates Rise Above 4%: Should You Lock in for 6 Months or a Year? With annual time deposit rates surpassing 4% at major banks, financial consumers have more options for managing their savings. Although the Bank of Korea has kept the base rate steady, the possibility of future increases has led to increased deliberation on whether to secure a high rate for one year or opt for a shorter-term deposit. According to the financial sector on October 24, Shinhan Banks Super SOL Welcome Time Deposit offers a maximum annual interest rate of 4.0% for a one-year term. The base rate is 3.6%, but customers can earn an additional 0.2 percentage points by using the Shinhan Super SOL app and meeting salary transfer conditions. Customers who sign up by the end of the year will benefit from the app-related preferential rate, and those without salary transfer records for the past six months can receive an additional preferential rate by depositing over 500,000 won monthly for three consecutive months. SC First Banks e-Green Save Deposit provides a base rate of 3.85% for a one-year term, with a 0.2 percentage point preferential rate for new customers, bringing the total to 4.05%. NH Nonghyup Banks NH All-One Bank 10th Anniversary Deposit also offers a maximum annual rate of 3.9%, with a base rate of 3.75% and an additional 0.15 percentage points for customers without any NH savings or deposits in the last six months. Savings banks are also offering products with rates above 4%. OK Savings Banks OK e-Regular Deposit provides 4.1% for terms between six and nine months, and 4.05% for terms exceeding nine months but less than 15 months. The OK e-Safe App Plus Regular Deposit 6 starts with an initial rate of 4.1%. Although the contract lasts for three years, the interest rate changes every six months, allowing customers to withdraw without penalty if they align with the interest adjustment cycle. How much difference does this make in actual interest earned? For a deposit of 10 million won at an annual rate of 4.0% for one year, the pre-tax interest is 400,000 won. After deducting a 15.4% income tax, the net interest is 338,400 won. For a 4.05% product, the net interest is 342,630 won, while for a 3.9% product, it is 329,940 won. If 10 million won is managed at both 4.0% and 4.1% for one year, the difference in net interest is only 8,460 won. Choosing the right term is also crucial. A deposit of 10 million won at an annual rate of 4.0% for one year yields 400,000 won in pre-tax interest. In contrast, a 6-month deposit at 4.1% would yield 205,000 won. If the same principal is then deposited again for another six months, a rate above 3.9% would be needed to match or exceed the interest earned from the one-year deposit at 4.0%. This calculation assumes no reinvestment of the interest earned during the first six months. If rates rise further, a strategy of opting for short-term deposits and reinvesting may be advantageous. Conversely, if deposit rates decline, locking in the current rate for one year may be preferable. However, it is important to note that an increase in the base rate does not necessarily lead to a proportional rise in deposit rates. The Bank of Koreas Monetary Policy Committee decided to maintain the base rate at 3% this week, following two consecutive increases in July and August to assess their impact, while leaving the door open for further hikes. Consumers should consider not only the highest rates but also the preferential conditions and timing of fund usage. Failing to meet salary transfer or new customer conditions may result in lower effective rates, and early withdrawal could lead to lower interest rates than agreed. The deposit protection limit is 100 million won per person, including principal and interest, for both banks and savings banks. Rather than trying to predict interest rate trends, it is essential to secure living expenses separately and choose deposit terms that align with the timing of fund usage.* This article has been translated by AI. October 24, 2026 06
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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 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 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
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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
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KOSPI Plummets 3.52% Amid AI Profitability Concerns and Supply Issues The South Korean stock market experienced another sharp decline, falling over 3% due to concerns about the profitability of artificial intelligence (AI) investments, profit-taking in semiconductor stocks, and a supply gap following the end of share buybacks.On October 22, the KOSPI closed at 5,533.77, down 3.52% from the previous trading day. Although it attempted to rebound early in the session, it failed to maintain upward momentum and remained below the 5,600 mark. The KOSDAQ also fell by 3.62%, closing at 764.10.Large-cap semiconductor stocks led the decline, with Samsung Electronics and SK Hynix dropping 4.03% and 5.49%, respectively. The sell-off was attributed to profit-taking following the previous days gains, as well as concerns surrounding SK Hynixs plans for a dual listing of its U.S. subsidiary, Solidigm.Supply pressures also contributed to the indexs drop. 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 decline.The end of share buybacks by Samsung Electronics and SK Hynix further weakened the buying base. Samsung completed a 15 trillion won buyback on October 6, while SK Hynix finished a 40 trillion won buyback on October 21. Lee Kyung-min, a researcher at Daishin Securities, noted, The end of SK Hynixs buyback has further weakened the supply buffer. Additionally, earnings reports from major U.S. tech companies did not fully alleviate market concerns. Meta reported strong third-quarter results but did not provide specific guidance for next years capital expenditures. The companys third-quarter free cash flow turned negative at $2.12 billion, raising doubts about whether it can sustain cash flow and profitability amid ongoing AI investment costs. Kang Jin-hyuk, a senior researcher at Shinhan Investment Corp., stated, The performance of individual companies does not prove the overall profitability of AI investments, so the earnings season continues to be a testing period. Geopolitical tensions in the Middle East also pressured investor sentiment. The U.S. ordered non-essential diplomatic personnel to leave Saudi Arabia, heightening concerns about potential localized military conflicts. Although the Bank of Koreas Monetary Policy Committee kept the benchmark interest rate steady at 3.00%, concerns about inflation and monetary policy did not provide sufficient catalysts for a market rebound.* This article has been translated by AI. October 22, 2026 18
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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
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U.S. 10-Year Treasury Yield Surpasses 5%, Raising Concerns for Long-Term Investors The yield on U.S. 10-year Treasury bonds has surpassed 5%, deepening concerns for long-term investors. As bond yields rise, prices fall, increasing the burden of unrealized losses for existing investors. However, the high yields present an opportunity for new investors to purchase bonds. With the potential for prolonged high interest rates due to U.S. fiscal pressures, careful consideration of investment timing and product selection is advised. According to the Federal Reserve on October 22, the yield on 10-year U.S. Treasury bonds reached 5.12% as of October 20. The yield on 30-year bonds also soared to 5.42%. From March 1 to October 20, the yield on 10-year bonds increased by 1.17 percentage points, while the 30-year yield rose by 0.81 percentage points. The sharp rise in yields is largely attributed to changes in expectations regarding U.S. monetary policy and fiscal pressures. Market expectations for short-term interest rates have increased, compounded by concerns over the deterioration of U.S. fiscal health and the expansion of long-term Treasury supply. There is also upward pressure on the term premium, the additional yield investors demand for holding bonds over a longer period. These structural factors may keep high yield levels sustained for an extended period. For domestic investors, the Bank of Koreas interest rate decisions also play a crucial role. The Banks Monetary Policy Committee decided to maintain the base rate at 3.00% on this day, following two consecutive rate hikes in July and August. While there remains the possibility of further increases, the allure of high yields from U.S. Treasury bonds exceeding 5% is drawing investor interest. So, is now a buying opportunity with long-term bond prices declining? One key factor to consider is duration, which measures a bonds sensitivity to interest rate changes. For instance, a bond with a modified duration of 15 years could see its price drop by about 15% if market rates rise by 1 percentage point. Conversely, if rates fall, significant capital gains could be expected. Actual price fluctuations will vary based on the bonds characteristics. Long-term bond exchange-traded funds (ETFs) are particularly sensitive to interest rate changes. If rates reverse and begin to decline, investors can anticipate gains from rising prices, but further increases could amplify losses. Existing investors may attempt to lower their average purchase price by buying more, potentially increasing their overall losses. If the goal is to secure yields higher than capital gains, purchasing individual Treasuries directly could be an option. Holding individual bonds to maturity guarantees the agreed-upon interest and face value, even if market prices decline in the interim. However, actual yields will vary based on the purchase price, and selling before maturity could result in losses. In contrast, typical long-term bond ETFs continuously replace bonds with longer maturities. Unlike individual Treasuries, they do not guarantee a specific repayment at maturity, making the market price at the time of sale crucial. If predicting interest rate direction is challenging, short-term bond ETFs, which generally exhibit lower price volatility, may serve as an alternative. Exchange rates also significantly influence yields. Even if U.S. Treasury investments yield 5% in dollars, a 5% decline in the dollars value against the won during the same period could negate most of the gains due to currency losses. To mitigate exchange rate risk, investors might consider hedging products, but they should also weigh the costs of such hedges. Ultimately, investing in U.S. long-term Treasuries should not be based solely on current interest rates but should also consider the investment horizon and risk tolerance. For funds needed in the short term, short-term bonds may be more suitable. Conversely, for those with a longer investment horizon, a strategy of gradual purchases while accounting for the potential for further rate increases may be worth considering.* This article has been translated by AI. October 22, 2026 16
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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 -
BOK chief's inflation outlook hints rates unlikely to come down before '28 SEOUL, October 22 (AJP) - Bank of Korea Governor Shin Hyun-song on Thursday credited the board’s two successive summer rate hikes with helping cool inflation and steady currency and debt markets while signaling that rates won't likely come down before 2028. Speaking after the monetary policy board unanimously held the base rate at 3.00 percent, Shin described the pause as the payoff from acting early. The BOK raised rates by a quarter percentage point in both July and August after holding them at 2.50 percent for more than a year. “At the August increase, I said we had dealt with a hoe with what would otherwise have required a spade. This hold is the fruit of that hoeing,” he said, invoking a Korean proverb about addressing a problem before it demands a bigger intervention. Shin said the unanimous decision reflected “considerable agreement on economic conditions, including inflation and growth, and on the overall assessment of our preemptive monetary policy.” “Our preemptive response helped keep domestic financial markets stable despite the U.S. Federal Reserve’s rate increase in September, and the (dollar-won) exchange rate also stabilized,” he said. The pause nevertheless came with a firm commitment to maintain a restrictive policy stance. “Growth and inflation appear likely to be stronger than projected in August, so we need to maintain the current restrictive policy stance,” Shin said. “We will respond until we are confident that inflation will settle sustainably at the target level of 2 percent.” That did not mean forcing inflation back to target next year regardless of other economic conditions, he added. “The principle is to achieve the inflation target within the monetary policy horizon while taking other conditions into account, rather than achieving it immediately next year,” he said. “We expect inflation to approach the target level in the year after next.” His remarks point to a prolonged period of policy restraint as inflation remains above target through 2027, with a return toward 2 percent expected around 2028. They do not, however, set a fixed timetable for further increases. Shin said the earlier hikes had given the board room to wait for more evidence before deciding its next move. “Upside risks to growth and inflation appear to have increased compared with the August forecasts, but we judged that it would not be too late to assess them further through incoming data, including third-quarter real GDP and October inflation,” he said. The unanimous pause and Shin’s measured tone supported the won and government bonds. The won strengthened 4.3 won to 1,323.2 per U.S. dollar at around 2 p.m., while government bond yields edged lower. The three-year yield fell 2.4 basis points to 3.808 percent and the 10-year yield declined 3.2 basis points to 4.135 percent. The BOK did not release an updated board interest-rate dot plot in October. The next update is expected in November, at its final rate-setting meeting of the year. An AJP poll suggests economists see further tightening ahead, with 3.50 percent emerging as the most widely expected peak. Four of the six economists who provided a terminal-rate forecast expected 3.50 percent. One forecast 3.75 percent, while another saw scope for rates to reach that level if strong semiconductor-led growth persists. NH Investment & Securities analyst Kang Seung-won also views 3.50 percent as an important threshold, although his assessment of the current policy stance differs from the governor’s. “Rates would need to rise to 3.50 percent before monetary policy can be considered restrictive under the current economic conditions,” Kang said. “A rate cut would only be possible once it is clear that the semiconductor cycle has turned down,” he added. JPMorgan economist Park Seok-gil is among those placing the peak at 3.75 percent. He expects three further quarter-point increases through the second quarter of 2027. Whether the cycle stops around 3.50 percent or extends toward 3.75 percent will depend largely on the durability of Korea’s growth momentum and the inflationary pressure accompanying it. The BOK said Thursday that growth this year and next would “considerably exceed” its August forecasts of 3.3 percent and 2.9 percent, respectively. Strong exports and investment are driving the expansion, while improving income conditions are expected to gradually broaden the recovery in consumption. Recent trade data show little sign of a slowdown in the semiconductor-led expansion. Exports surged 105.4 percent from a year earlier to $61.6 billion in the first 20 days of October, with semiconductor shipments reaching a record $27.5 billion for the period. Inflation, meanwhile, has eased but remains above target. Consumer prices rose 2.9 percent from a year earlier in September, while core inflation excluding food and energy stood at 2.8 percent. Upstream cost pressures remained substantial: producer prices increased 7.7 percent and won-denominated import prices rose 17.6 percent. The BOK expects this year’s headline and core inflation rates to remain broadly in line with its August forecasts of 2.7 percent and 2.5 percent, respectively. The outlook for next year is less favorable. Both measures are now expected to exceed the previous forecasts of 2.3 percent and 2.5 percent as accumulated cost increases feed through to prices and demand-side pressures strengthen. That combination of stronger growth and persistent inflation leaves little room for an early shift toward easing. A sustained slowdown in semiconductors or the broader economy would weaken the case for additional hikes, but Thursday’s pause offered no indication that the tightening cycle was over. The BOK holds its final policy meeting of the year on Nov. 26, when it will also release updated growth and inflation forecasts. October 22, 2026 15 -
High Interest Rates Deepen Corporate Divide Despite Semiconductor Boom The Bank of Korea has kept its benchmark interest rate unchanged, but concerns are growing that high market interest rates and the possibility of further increases this year could exacerbate the funding disparities among companies. Firms benefiting from the semiconductor boom can better absorb rising interest burdens, while those facing domestic sluggishness and industry downturns may find increased borrowing costs directly impacting their operations.As of October 14, the interest rate on three-year AA- rated corporate bonds was 4.56%, up 1.10 percentage points from 3.46% at the end of last year. The rate for 91-day commercial paper also rose from 3.30% to 3.66% during the same period, indicating a growing burden on corporate financing costs.The net redemption of corporate bonds has also increased. In September, companies redeemed a net 3.4 trillion won in bonds, up from 900 billion won the previous month. The Bank of Korea attributed this rise to the ongoing issuance burden due to higher market interest rates and an increase in maturing amounts.During its meeting on October 22, the Bank of Koreas Monetary Policy Committee decided to maintain the benchmark interest rate at 3.00%, but a tightening stance is expected to continue. The consumer price inflation rate in September was 2.9% year-on-year, exceeding the Banks inflation stability target of 2%, while the core inflation rate also recorded 2.8%, suggesting ongoing inflationary pressures that could lead to further rate hikes in November.If market interest rates remain high, the gap in funding conditions among companies may widen. Firms anticipating improved performance due to strong semiconductor exports may manage increased interest burdens better, while those suffering from domestic downturns may struggle with rising borrowing costs.In 2024, the operating profit margin for domestic non-financial corporations rose to 4.6% from 5.2% last year, yet the proportion of companies with an interest coverage ratio below 100% increased from 42.8% to 42.9% during the same period. While overall corporate profitability indicators have improved, the share of companies unable to meet interest expenses has also grown.Shin Hyun-sung, a senior researcher at the Korea Financial Research Institute, stated, This years corporate performance improvement has been concentrated in sectors like semiconductors and artificial intelligence, and the structural vulnerabilities of weaker sectors are unlikely to be easily resolved, suggesting that the polarization of corporate performance by sector will persist for the time being.The disparity in corporate performance could also pose risks to the financial sectors stability. An increase in companies unable to manage interest burdens or a rise in defaults in vulnerable sectors could heighten the financial stability concerns for banks.Seo Ji-yong, a professor at Sangmyung University, warned, If high interest rates persist, the gap between companies could extend beyond mere differences in borrowing costs to affect their ability to secure funding. Companies that rely more on bank loans and lack collateral or creditworthiness are likely to face greater constraints, which could lead to disparities in investment and employment opportunities.As disparities continue across sectors and company sizes, attention must be paid to how the deteriorating repayment capabilities of vulnerable companies may impact the financial sectors stability.Moon Jeong-hee, chief economist at KB Kookmin Bank, noted, The rapid increase in export dependence on semiconductors is amplifying the impact of fluctuations in specific industries on the overall economy. The key issue for future policy will be how to manage the financial burdens of vulnerable companies while spreading the warmth of economic recovery across all sectors. October 22, 2026 15
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Bank of Korea Governor Shin Hyun-sung: Stock Market Decline Temporarily Affects Consumption Bank of Korea Governor Shin Hyun-sung stated that there has been a temporary adjustment in consumption due to the recent decline in stock prices.During a press briefing following the monetary policy meeting on October 22, Shin noted, Stock prices are influenced by various factors beyond the real economy, which is why they have recently experienced significant adjustments. I believe this is having some impact on the real economy as well.He also addressed the effects on consumer sentiment and retail spending. With a substantial increase in individual investors participating in the stock market, he acknowledged the possibility of weakened consumer sentiment and reduced spending on financial services due to the stock market decline.Shin pointed out that a decrease in stock trading can statistically reduce consumption. He explained, Among consumption items, financial services are affected by transaction volumes and the fees charged by financial institutions. When trading volumes decline and the stock market cools, there tends to be a statistical decrease in consumption of financial services.However, he assessed that the semiconductor industry remains robust despite the recent stock market downturn. As I mentioned during the monetary policy briefing in July, it is important to focus on the prices themselves rather than stock prices when it comes to semiconductors, he said. Looking at long-term contracts and spot prices, there are no signs of a decline in DRAM spot prices.He added that the strength of semiconductor prices positively influences exports and growth. In the long term, exports and investments are improving supply and demand conditions, Shin noted, adding that consumption is also showing a fairly solid trend.* This article has been translated by AI. October 22, 2026 12
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Bank of Korea Governor Shin Hyun-sung Predicts Inflation Will Approach Target by 2028 Shin Hyun-sung, Governor of the Bank of Korea, projected that the inflation rate will approach the target level of 2% by 2028.During a press briefing following the Monetary Policy Committee meeting on October 22, Shin stated regarding the timeline for achieving the inflation target, It is not necessary to achieve exactly 2% next year. While I expect inflation to be above 2% next year, I believe we will get closer to the target around the year after next.He explained, The goal for inflation is to achieve it in the course of implementing monetary policy, taking into account growth and other economic conditions, rather than achieving 2% immediately.Shin also forecasted that next years inflation outlook would be higher than previously expected. He anticipated that the core inflation rate for next year would be slightly above the August forecast of 2.5%.Additionally, he described the decision to maintain the current interest rate as a result of securing policy flexibility through prior preemptive rate hikes. The Bank of Korea froze the benchmark interest rate at 3.00% after raising it twice in July and August.Shin noted, The consecutive interest rate hikes have provided us with considerable flexibility, adding that this allows the bank to implement policies tailored to domestic conditions without being swayed by decisions from the U.S. Federal Reserve or market situations.Regarding the possibility of further rate hikes by the U.S., he maintained a cautious stance. He remarked, Since the dollar is a key currency, the Feds decisions significantly impact financial conditions and assets worldwide, and Korea cannot remain unaffected. However, we are closely monitoring the direction of the Feds monetary policy and are communicating at the Bank for International Settlements (BIS) meetings.* This article has been translated by AI. October 22, 2026 12