Korean Investors Retreat From Brazilian Bonds Despite Rate Cuts

* 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.

1. Political Unease Ahead of Election Compounded by Weak Real: Brazilian Bonds Fall Out of Favor

- Key summary: New buying of Brazilian bonds by domestic investors fell for a third consecutive month. According to the Korea Securities Depository, net purchases in August totaled about $1.13 million (about 1.6 billion won), down 64% from the previous month's total of $3.10 million, extending a decline that has continued since May of this year, when net purchases reached $4.28 million. The Central Bank of Brazil has cut its base rate four consecutive times since March, from 15% to 14% a year for a total of 100 basis points, but 10-year government bond yields have held about 69 basis points above their level just before the first cut, limiting the boost to prices. With government debt surpassing 80% of gross domestic product in April and the odds rising that Brazilian President Luiz Inacio Lula da Silva wins a fourth term, the 10-year term premium gap with the United States has widened to 250 basis points.

2. Jensen Huang: Nvidia to Grow 70% Next Year, Could Have Doubled Without Memory Bottleneck

- Key summary: Nvidia posted revenue of $96.22 billion (about 133.2 trillion won) and operating profit of $63.734 billion (about 88.34 trillion won) in the second quarter of fiscal 2027, up 106% and 124% respectively from a year earlier. Data center revenue, which includes AI chips, drove the results at $89 billion, and the customer base has diversified from hyperscalers to sovereign AI and neoclouds. Nvidia Chief Executive Jensen Huang said the company set next year's revenue growth rate at 70% based on available supply volumes, and that growth would have been far higher without supply constraints. Chief Financial Officer Colette Kress said memory shortages would act as a bottleneck to growth through the end of fiscal 2028, while component supply commitments more than doubled in a single quarter, from $119 billion (about 164 trillion won) to $279 billion (about 385 trillion won).

3. Base Rate at 3%: A Time of Tightening Arrives

- Key summary: The Bank of Korea held a monetary policy board meeting on the 27th and raised the base rate by 0.25 percentage point to 3%. It is the first time the base rate has entered the 3% range in a year and six months, since February 2025, and the first back-to-back increase in three years and seven months, since January 2023, marking only the fourth such instance on record. Governor Shin Hyun-song said the board judged that monetary policy needed to respond preemptively to secure macroeconomic stability including prices, stressing that the consecutive increases sent a strong signal to the market. Semiconductor-driven growth also supported the case for the hike. The central bank raised its real GDP growth forecast for this year to 3.3% from 2.6%, and most board members put the base rate six months out at 3.25% on the dot plot, pointing to one additional increase.

4. Huang Rejects Circular Financing Criticism: My Regret Is Not Investing More in OpenAI

- Key summary: Nvidia Chief Executive Jensen Huang directly rebutted criticism that equity investments in customers and financing support amount to circular financing. Appearing on CNBC, he stressed that AI companies are the first generation of startups needing tens of billions of dollars to fund their business, and that the financial system has not kept pace with the speed of growth. Nvidia has agreed with Wall Street firms including Apollo Global Management, Blackstone and Goldman Sachs to assemble a $500 billion AI infrastructure financing package, and has committed more than $100 billion to an Ohio data center that OpenAI will lease. Separately, Chief Financial Officer Colette Kress said investments and commitments to AI companies stand at about $50 billion, a very small portion of expected free cash flow, leaving the risk manageable.

5. Intuitive Machines Moves Beyond Moonshots Into Satellites and Communications

- Key summary: As lunar exploration shifts from government-led programs to private procurement, Intuitive Machines is emerging as a core operator in the U.S. lunar economy. In September 2024 it was selected as a provider for the National Aeronautics and Space Administration's Near Space Network Services program, securing a contract worth up to $4.82 billion, and it plans to launch four Altus lunar data relay satellites at once in 2028. Second-quarter revenue this year was $206.2 million, more than four times the $50.3 million recorded in the same period last year, and the order backlog stood at $1.8 billion at the end of June, up 844.67% from the end of last year. With national security revenue jumping to about 30% of the total from 3% in a single year, securing landing stability for IM-3, targeted for launch in the first quarter of 2027, is expected to be the key variable for follow-on orders.

6. [Exclusive] Lotte Non-Life Insurance Heads to Open Sale After Talks With Shinhan Collapse

- Key summary: Lotte Non-Life Insurance (000400) will enter an open sale process after negotiations for a private deal with Shinhan Financial Group broke down. JKL Partners, which holds a 77% stake, and sale adviser Samjong KPMG are preparing to file a public sale disclosure late next month, with letters of intent to be received in late October and a share purchase agreement expected as early as early next year. Shinhan Financial Group offered about 1 trillion won for a 100% stake, while JKL Partners sought a figure in the low 1 trillion won range, leaving the two sides unable to reach agreement. Lotte Non-Life Insurance's core capital ratio improved 16 percentage points in a single quarter, from minus 21.4% in the first quarter of this year to minus 5.4% in the second, and its contractual service margin reached 2.4478 trillion won last year, prompting expectations of strong interest as the only mid- to large-sized non-life insurer on the market.