▲ 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]
■ U.S. Treasury yields in the 5% range are a structural shift, not a temporary phenomenon: The yield on the 10-year U.S. Treasury note has settled at around 5.10%, and on the 24th it climbed as high as 5.22%, its highest level since 2007. Analysts say that surging AI infrastructure investment, a widening fiscal deficit and the Federal Reserve's tightening stance have combined to entrench prolonged high interest rates as a structural change in the economy's makeup.
■ 60 trillion won in excess tax revenue deepens fiscal-monetary discord: With excess tax revenue expected to exceed 60 trillion won this year, a trilemma is unfolding in which expansionary fiscal policy, price restraint and debt repayment collide. With consumer price inflation at 3.1% in August, warnings have emerged that the possibility of an additional rate increase by the Bank of Korea cannot be ruled out if fiscal expansion further stimulates aggregate demand.
■ Stark reversal in foreign and retail flows, detected simultaneously in three stocks: While retail investors net sold 1.3393 trillion won worth of three stocks — SK Square, SK Innovation and Korean Air — in September, foreign investors concentrated purchases of 1.2815 trillion won in the same stocks. Unlike retail investors taking short-term profits, foreign investors are seen by the market as placing weight on factors that could change corporate value from next year onward.
[News of Interest to Stock Investors]
1. "U.S. Treasury Yields at 5%" Become the New Normal: "30-Year Will Top 6% This Year"
Key summary: The yield on the 10-year U.S. Treasury note has settled at around 5.10% and hit 5.22% on the 24th, its highest since 2007, while the 30-year yield also surged to 5.501% the same day, its highest since 2004. In a Bloomberg survey of 173 financial market experts, 53% of respondents said the 30-year U.S. yield would exceed 6% this year — a level not seen since 2000, during the dot-com bubble. The dominant assessment is that this is not a temporary phenomenon, given overlapping structural factors including surging demand for AI infrastructure investment funds, a spike in oil prices stemming from U.S.-Iran tensions, and a doubling of hedge funds' U.S. Treasury exposure over two years. With the average yield on government bonds worldwide also reaching 4.04%, the highest level since 2000, the trend is expected to put considerable pressure on the valuations of South Korean growth and technology stocks.
2. Indiscriminate Spending Increases Stoke Inflation: "Pace Must Slow During Expansion"
Key summary: With excess tax revenue projected to surpass 60 trillion won this year, a "trilemma" has formed in which three goals — expansionary fiscal policy, price restraint and government bond repayment — collide. With consumer price inflation at 3.1% in August and core inflation at 3.4%, there is considerable concern that fiscal expansion could offset the effect of the Bank of Korea's rate increases. If 60 trillion won in excess tax revenue is transferred to the government's future response fund, the fund could swell to as much as 222 trillion won, which is expected to add to spending pressure going forward. Experts say fiscal expansion during an economic expansion is a procyclical policy that stimulates both inflation and long-term interest rates at the same time, and that a carefully calibrated mix of fiscal and monetary policy is needed.
3. Foreign Investors Bet 1.3 Trillion Won on SK Square, SK Innovation and Korean Air
Key summary: From Sept. 1 to 23, retail investors net sold 1.3393 trillion won worth of SK Square, SK Innovation and Korean Air, while foreign investors net bought 1.2815 trillion won of the same stocks, leaving supply and demand sharply divided. All three stocks posted double-digit gains this month — SK Square up 14.8%, SK Innovation up 18.9% and Korean Air up 12.1% — and retail investors took profits during that stretch while foreign investors bet on further gains. In SK Square's case, its stake in SK hynix (000660) accounts for 98.3% of its 273.6 trillion won net asset value, and expectations for a rise in SK hynix shares and expanded dividends are cited as the key reason behind foreign buying. Securities analysts interpret foreign investors as placing more weight on earnings and factors affecting corporate value from next year onward than on short-term share prices.
[Reference News for Stock Investors]
4. Samsung Electronics (005930) to Disclose DS Special Bonus Criteria This Week
Key summary: Samsung Electronics' Device Solutions (DS) division will disclose detailed criteria for its special performance bonus this week, marking a turning point in an internal dispute over compensation. The DS special bonus is funded by 10.5% of the division's operating profit and is paid entirely in treasury shares after taxes, with recipients allowed to sell one-third immediately and the remainder restricted from trading for one to two years. Brokerages' consensus estimate for third-quarter operating profit is 105.6443 trillion won, and whether the company tops 100 trillion won in quarterly operating profit for the first time in its history will be determined when preliminary earnings are announced early next month. As the expansion of DS compensation fuels growing discontent among Device eXperience (DX) division employees over the bonus gap, a town hall meeting hosted by President Roh Tae-moon next month is emerging as the key to resolving the situation.
Key summary: From late this month, government bonds and stocks can be pledged as collateral for securities settlement facilitation payments, with government bonds eligible for a collateral recognition ratio of up to 98%. The Korea Securities Depository estimates that institutions' cash liquidity burden will fall by more than 50%, and a system recognizing securities scheduled to be received as collateral will also take effect next month. As settlement practices that required foreign institutions to tie up trillions of won in cash each day are eased, some expect inflows of foreign quantitative funds and high-frequency trading (HFT) money to become easier. Securities analysts assess the easing of advance deposit barriers for foreign institutions as laying an institutional foundation for inclusion in the MSCI Developed Markets Index.
6. From Music Royalties to Electricity: The Battle for Killer Security Token Products Begins
Key summary: Ahead of the opening of the security token offering (STO) market in February next year, brokerages are accelerating competition to secure next-generation alternative assets such as music copyrights, carbon credits, renewable energy infrastructure and unlisted shares. Shinhan Securities signed a contract with Musicow to manage a 40 billion won music intellectual property fund as it moves to secure Korean content, and future electricity sales proceeds from power plants as well as the securitization of data centers and ships are also under discussion. Major institutions including BCG project that the global STO market will expand to between $16 trillion and $30 trillion by 2030. STOs, which convert non-standardized physical assets into structures allowing small-scale investment based on blockchain, are seen as the starting point of a paradigm shift in capital markets, and behind-the-scenes competition among brokerages is intensifying.
▶Read the article: Trillions of Won in "Cash Shackles" to Be Loosened: Government Bonds Accepted as Collateral at Up to 98%
▶Read the article: Samsung Electronics to Disclose DS Special Bonus Criteria This Week
