▲ 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 news items tailored to each reader type.
[Key Issue Briefing]
■ Europe's fiscal contagion: France's government bond yields have jumped to their highest level in 25 years, with signs that fiscal instability is spreading to other European countries such as Italy and Greece. As the yield gaps of both countries' bonds widened against Germany's, the market has revived the word "contagion" from the Greek crisis 15 years ago.
■ Pressure for won appreciation: Concerns spread that the undervaluation of the won could become a subject of international debate after the IMF lowered its benchmark for Korea's appropriate current account balance. Meanwhile, overnight derivatives trading surpassed $110 billion within two months of the foreign exchange market opening around the clock. As a result, the influence of offshore trading, long cited as one of the main causes of sharp exchange rate swings, is on the decline.
■ Memory technology race: China's ChangXin Memory Technologies (CXMT) has set its sights squarely on Korean memory makers, declaring it will release server DRAM using a next-generation cell structure within the year. For SK hynix (000660), the expiration of a lockup on its American depositary receipts (ADRs) has made it legally possible to issue additional ADRs to narrow a price gap of more than 40% with its ordinary shares.
[News of Interest to Global Investors]
1. French 10-Year Yield at Highest Level in 25 Years, With Debt 10 Times Greece's
- Key points: France's 10-year government bond yield climbed to the 4.8% range on the 12th, its highest level in 25 years. It approached 5% earlier this month, a sharp rise from below 4% two months ago. France's national debt stands at about 3.6 trillion euros, roughly 10 times the debt of Greece during its 2010 fiscal crisis, and its debt ratio is projected to exceed 120% of gross domestic product within a year. The 10-year yields of Italy and Greece have also widened against Germany's by about 120 basis points (1 bp = 0.01 percentage point) and 100 bp, respectively. Analysts say concerns about contagion are spreading again in the market.
- Key points: The International Monetary Fund (IMF) revised its economic assessment model and lowered Korea's appropriate current account balance by 1.4 percentage points, from 4.7% of GDP in 2024 to 3.3% in 2025. According to the Bank of Korea, the revision of the demographic component alone pushed the appropriate level down by 1.1 percentage points, the largest drop among the 26 countries compared. The current account surplus in August was $46.11 billion, the second-largest monthly figure on record, bringing the cumulative surplus for January through August to $279.2 billion. The Bank of Korea believes the IMF model fails to capture Korea-specific characteristics, such as the high savings propensity of households headed by people aged 65 and over. Still, some point out that major trading partners could cite the surplus to demand an appreciation of the won.
- Key points: About two months after the foreign exchange market began operating 24 hours a day, overnight trading in foreign exchange derivatives surpassed $110 billion. According to data the Bank of Korea submitted to the office of Rep. Kim Nam-joon of the Democratic Party of Korea, forward and foreign exchange swap transactions during overnight hours totaled $111.54 billion from July 6 to Aug. 31. That works out to about $2.8 billion a day, or 4.3% of the daily average of about $65 billion in the second quarter of this year, before round-the-clock trading began. Meanwhile, trading volume in won-dollar non-deliverable forwards (NDFs) fell to a daily average of $30.9 billion in September from $35.4 billion in June, a sign that the influence of offshore trading is weakening.
[Reference News for Global Investors]
4. With Lockup Expired, Will SK hynix Issue More ADRs?
- Key points: The lockup on SK hynix's ADRs expired on the 7th, making it legally possible to increase ADRs through a new share issue or conversion of ordinary shares. The ADRs closed at $169.03 (about 225,384 won) on the New York market on the 9th, a premium of 40.42% over the ordinary shares' closing price of 1.605 million won in Korea the same day. Chey Tae-won, chairman of SK Group, said shortly after the ADR listing that the company could issue additional ADRs if investor returns were good and the share price remained stable. The share buyback is about 90% complete and is expected to wrap up around the 20th. Some observers say guidance on expanding ADRs could come at the third-quarter earnings announcement expected on the 27th.
5. China's CXMT, Chasing Korean Memory Makers: "We Will Launch Server DRAM Within the Year"
- Key points: ChangXin Memory Technologies (CXMT), China's largest DRAM maker, said it has made meaningful progress in developing 4F squared (4F²), a next-generation cell structure. It then announced it would launch server DDR5 modules (RDIMM) using the technology by the end of the year. 4F² can reduce the area of the cell, the smallest unit of data storage, by about 33% compared with the 6F² structure that is currently the industry standard. Samsung Electronics (005930) is targeting mass production in 2028, meaning that CXMT is about two years ahead based on announced schedules alone. Industry officials in Korea, however, say applying a new technology and achieving stable mass production are separate matters, and that it is difficult to verify specific technical details such as the process or yields.
- Key points: Shin Hyun-song, governor of the Bank of Korea, said at a National Assembly Finance and Economic Planning Committee audit on the 12th that while the exchange rate was in the 1,330-won range that day, it remained higher than in past years, adding that there was room for further strengthening ahead. The won-dollar exchange rate closed at 1,335.1 won, down 7.7 won from the previous session and the lowest level since Oct. 4, 2024. The governor cited two base rate increases in July and August, totaling 0.5 percentage point, as the reason behind the currency's stability. On currency swaps, however, he took a cautious stance, noting that even countries with standing swap lines see wide exchange rate swings.
