▲ AI PRISM* Personalized Economic Briefing
* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six tailored news items for each reader type.
[Key Issues Briefing]
■ Won Strengthens Alone: The won-dollar exchange rate fell to 1,330.3 won on the 19th, its lowest level in two years. With the won appreciating more than the yen and the yuan even as the dollar index climbed, the current account surplus driven by semiconductor exports has emerged as the key variable for the exchange rate.
■ Broader AI Investment: Despite the sharp drop in large-cap semiconductor stocks, analysts say growth in the artificial intelligence industry is only now entering full swing. Accordingly, NH-Amundi Asset Management said it would shift part of its holdings in Samsung Electronics (005930) and SK hynix (000660) into materials, parts and equipment suppliers while maintaining a high weighting in the substrate sector.
■ Pressure to Unwind Leveraged Bets: Margin loan balances at Japan's Kioxia Holdings have swelled to the largest among listed companies, increasing pressure for further declines. In South Korea, meanwhile, forced liquidations have topped 50 billion won for four consecutive trading sessions, while investor deposits — cash waiting on the sidelines — and margin loan balances have both declined.
[News of Interest to Financial Product Investors]
1. Won Strengthens Alone Despite Strong Dollar, Supported by Current Account Surplus
- Key points: The won is rising more than any other major currency despite high oil prices and a strong dollar. In the Seoul foreign exchange market on the 19th, the won-dollar rate stood at 1,330.3 won as of 3:30 p.m., down 1.1 won from the previous session and the lowest level since Oct. 2, 2024. The rate has fallen about 14.4% from the 1,550-won range in early July to 1,331.4 won on the 16th of this month. Over the same period, the dollar index (DXY, which measures the dollar against six major currencies) rose from 101.39 to 101.84. According to the Bank of Korea, the current account surplus from January through August this year was $279.2 billion, about four times the $69.7 billion recorded in the same period last year. Analysts attribute the shift to a surge in memory chip exports, which increased the supply of foreign currency and offset pressure from capital outflows.
- Key points: Choi Chi-hyun, deputy head of the second equity management division at NH-Amundi Asset Management, said on the 19th at a press briefing marking the first anniversary of the Growth-Led Korea Fund that the firm would shift part of its holdings in Samsung Electronics and SK hynix into semiconductor materials, parts and equipment companies. The decision reflects a judgment that earnings estimates for the two companies have stagnated for two consecutive months, while investment in front-end semiconductor equipment is expected to increase next year. The fund, launched on Oct. 14 last year, returned 84.86% as of the 14th of this month, outperforming the KOSPI by 17.23 percentage points, with about 80% of the excess return coming from the semiconductor and information technology hardware sectors. Park Jin-ho, head of equity management at NH-Amundi, said combined shareholder returns at Samsung Electronics and SK hynix could reach about 300 trillion won next year, adding that delivering on shareholder return commitments is a condition for a re-rating of South Korea's stock market.
3. Kioxia Down 63% as 7.8 Trillion Won in Leveraged Bets Weighs on Stock
- Key points: Japanese chipmaker Kioxia Holdings faces pressure for further declines as margin loan balances surge. Bloomberg reported on the 18th, citing Tokyo Stock Exchange data, that Kioxia's margin buying balance stood at about 920 billion yen (about 7.8 trillion won) as of the 15th, the largest among listed companies. Trading value on the 16th was 766 billion yen (about 6.5 trillion won), down 84% from its peak, and the share price has fallen 63% from its record high in June. Still, rising NAND flash prices are expected to lift net profit for the current fiscal year to about 5.6 trillion yen (about 47.2 trillion won), roughly 10 times last year's level, and its 12-month forward price-to-earnings ratio stands at 3.2, below U.S. rival SanDisk's 6.2.
[Reference News for Financial Product Investors]
4. Forced Liquidations Top 50 Billion Won for Four Straight Sessions, Bruising Sentiment
- Key points: As volatility in South Korea's stock market increased, forced liquidations — sales triggered by insufficient margin — exceeded 50 billion won for four consecutive trading sessions. According to the Korea Financial Investment Association, the figures were 59.3 billion won on the 13th, 89.3 billion won on the 14th, 80.5 billion won on the 15th and 57.2 billion won on the 16th. Investor deposits stood at 94.4029 trillion won on the 16th, down more than 6 trillion won in four sessions from 100.4389 trillion won on the 12th, while margin loan balances fell to 32.2528 trillion won, the lowest since the 10th of last month. The KOSPI closed at 5,768.01 on the 19th, up 1.76%, after falling for seven consecutive sessions from the 6th through the 15th. Forecasts remain divided, with some expecting a recovery based on the earnings strength of semiconductor companies and others saying it is too early to call an uptrend, citing credit risk in the AI industry and the burden of foreign investor flows.
- Key points: The dispute over the National Pension Service's suspension of rebalancing, or portfolio adjustment, reignited around the parliamentary audit of government agencies. Rumors spread in the market that 240 trillion won of the fund had evaporated amid the KOSPI's plunge, but according to the National Pension Service Investment Management, reserves stood at 1,684.2 trillion won at the end of July, down 181.4 trillion won, or about 9.7%, from the end of June, with a cumulative return of 14.84% since the start of the year. Lee Jun-seo, a professor of business administration at Dongguk University, and other experts said it is worth looking at Japan's Government Pension Investment Fund, which raised its domestic equity allocation to 25% from 12% in 2014 and posted a 22.67% return in 2023. Kim Sung-joo, chairman of the National Pension Service, said that repeated selling and buying in response to market conditions generates costs that weigh on long-term returns, and that this is a shared principle among pension funds worldwide.
6. Takaichi Signals Deficit-Financing Bonds: 'Not Ruling Out Issuance'
- Key points: Japanese Prime Minister Sanae Takaichi, appearing before the House of Councillors budget committee on the 19th, said she would appropriately control the volume of government bond issuance to fund a cut in the consumption tax rate on food, set to take effect for two years from April next year, while adding that she was not ruling out bond issuance. The remarks mark a shift from her earlier position that the funds would be secured solely through spending restructuring. The consumption tax cut and income-linked benefit support measures are expected to cost about 10 trillion yen (about 84 trillion won) over two years, and Japan's national debt last year stood at 204.4% of gross domestic product, the highest among major advanced economies. Meanwhile, Japan's long-term interest rate rose from the 1.6% range when the administration took office to above 3% in September this year, and the exchange rate climbed from the 151-yen range per dollar to as high as the 163-yen range, leaving the bill for aggressive fiscal policy to come due in the bond and foreign exchange markets.
