▲ AI PRISM* Personalized Economic Briefing
* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an AI-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six pieces of news tailored to each reader type.
[Key Issue Briefing]
■ Market Volatility Eases: The KOSPI, which had repeatedly swung sharply, saw its average intraday volatility fall by more than half, from 7.10% last month to 3.45% in August, as the market entered a calmer phase. Leverage unwinding has entered its final stage, and the concentration in semiconductor leaders has eased, lifting the share of advancing stocks. With the won stabilizing, foreign investors were net buyers for a second consecutive day.
■ Hawkish Tone at the Fed: Despite worsening U.S. employment data, Federal Reserve officials have offered a series of assessments that inflation is the more serious problem. As a result, the market sees roughly equal odds of the September Federal Open Market Committee holding rates and raising them by 0.25 percentage points, an unusual split in expectations.
■ Corporate Bond Market Strain: As corporate bond yields surged to the mid-to-high 4% range, large-company public corporate bond issuance shrank to a four-year low. A sharp rise in bond issuance by Korea Electric Power Corp. added to supply pressure in the market. Meanwhile, a combination of weaker demand from high-yield funds and a series of defaults nearly halved issuance of lower-grade bonds rated A+ or below, sharpening the divergence by credit rating.
[News of Interest to Financial Product Investors]
1. 'Dizzying Market' Steadies: KOSPI Rebounds on Solid Earnings and Return of Foreign Investors
- Key summary: The KOSPI closed at 6,579.04 on the 12th, up 3.68% from the previous session, rising for a third consecutive session. It jumped as high as 6,668.43 during the day, triggering a buy-side sidecar for the first time since the 5th, and the KOSPI 200 Volatility Index (VKOSPI), known as the "fear gauge," closed at 56.49, falling into the 50s for the first time in about three months. Margin loan balances, which had swelled to 38.6329 trillion won on June 24, fell to 27.4038 trillion won on August 4 before rising to 30.0387 trillion won on the 11th, and the net assets of single-stock leveraged exchange-traded funds (ETFs) also plunged, bringing the unwinding to a close. Foreign investors bought a net 2.8357 trillion won that day, driving the index higher, while Samsung Electronics (005930) and SK hynix (000660) rose 6.68% and 5.54%, respectively.
2. "Inflation Is the Bigger Problem": Hawkish Voices Grow at the Fed
- Key summary: Chicago Federal Reserve Bank President Austan Goolsbee said the biggest problem now facing the economy is not a collapse in jobs but rapidly rising prices and living costs. Cleveland Fed President Beth Hammack, who dissented against holding rates at last month's FOMC, went further and argued that rates should be raised several times going forward. Nonfarm payrolls fell by 23,000 in July, but the 4.1% unemployment rate was assessed as close to full employment. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the probability of a hold in September stood at 50.1% and the probability of a 0.25 percentage point hike at 49.9%.
3. Hit by the Super-Weak Yen: Japan ETF Investors Sigh
- Key summary: With the yen falling to its lowest level in about 40 years, losses have deepened for domestic "yen-tech" ETF investors. The TIGER Japan Yen Futures fund posted a year-to-date return of -3.74% and a one-month return of -4.47% as its decline steepened, while products that also hold long-term U.S. Treasurys have fallen more than 10% this year. By contrast, the currency-hedged ACE Japan Nikkei 225 (H) surged 34.98%, widening the return gap with currency-exposed products. Analysts noted that the effect of coordinated intervention by authorities has its limits, and some projected that the Bank of Japan (BOJ) could move up an additional rate hike to September or October.
[Reference News for Financial Product Investors]
- Key summary: The yield on three-year AA- corporate bonds rose to 4.651% on the 24th of last month, setting a new high for the year and topping the 4.6% level for the first time in about two years and eight months, since November 2023. This year's large-company public corporate bond issuance totaled 29.2037 trillion won, down about 32% from the same period last year and a four-year low. Samsung Biologics (207940) is not considering refinancing 300 billion won worth of corporate bonds due to be repaid within the year, and Shinsegae (004170) Group has excluded corporate bond issuance from its plan to fund the purchase of a stake in SSG.com. LX Group is leaning toward delaying issuance this year and resuming early next year. The market views this month's Monetary Policy Board meeting and the announcement of the 2027 budget as a turning point.
5. KEPCO Bond Issuance Up 1.3-Fold: "Fears of a Black Hole in the Bond Market"
- Key summary: Korea Electric Power Corp. issued 1.07 trillion won worth of bonds last week and decided to issue an additional 200 billion won on the 12th. Issuance since July has totaled about 3.3 trillion won, already exceeding the 2.6 trillion won total for the third quarter of last year even with about 50 days left in this year's third quarter. As the system marginal price (SMP) has exceeded the break-even point of 146 won per kWh every day since the 1st of this month, in the wake of war in the Middle East, while electricity rates have been frozen for an extended period, funding demand has risen. First-half operating profit fell 16.6% to 4.9127 trillion won, and the yield on three-year KEPCO bonds stood at 4.183% as of the 11th, up about 1 percentage point from the start of the year, raising concerns that it could push up corporate bond issuance yields along with it.
6. Even Retail Sentiment Vanishes: Issuance of Lower-Grade Bonds Rated A+ or Below Halves
- Key summary: Lower-grade bonds rated A+ or below issued in the public and private markets this year totaled 5.9660 trillion won, nearly half the 10.4490 trillion won in the same period last year. Issuance of AA- to AA+ bonds fell 37% over the same period, but the drop in lower-grade bonds was far more pronounced. Buying by IPO high-yield funds, which had been a key buyer, weakened amid a sluggish IPO market, and combined with defaults at JR Global REIT (348950) and JoongAng Group, retail sentiment left in large numbers. Still, as with SK Ecoplant (A-), which secured demand more than nine times its offering amount, sorting the wheat from the chaff by sector and group is expected to continue.
▶ Read the article: KEPCO Bond Issuance Up 1.3-Fold: "Fears of a Black Hole in the Bond Market"
▶ Read the article: "Construction-Type Private BT Guarantees Only Profit to the Private Sector Without Operating Risk": Budget Office Opposes Expansion
▶ Read the article: Large-Company Corporate Bond Issuance at Four-Year Low; Samsung Biologics, Shinsegae and LX Also Delay
