Seoul Bond Market Reflects Semiconductor Adjustments and KDI Economic Outlook

The Seoul bond market is digesting the adjustments in semiconductor stocks and the economic outlook from the Korea Development Institute (KDI) on the 19th. The Bank of Korea's assessment that strong semiconductor exports could simultaneously boost growth and prices, along with the differing diagnoses from KDI, have emerged as factors to gauge the interest rate trajectory. According to Yonhap Infomax, the Seoul bond market may show strength due to the sharp decline in semiconductor stocks. The stock market adjustment that began in Asia continued through New York, and in the bond market, a trend is forming to observe whether the adjustment in risk assets will lower upward pressure on interest rates. KDI announced its economic outlook at noon on the same day, and market participants are expected to use this to gauge the Bank of Korea's revised economic outlook next week. KDI's previous growth rate forecast was 2.5%, which shows a 10 basis point difference compared to the Bank of Korea's May forecast of 2.6%. The key issue is how much the increase in semiconductor exports will translate into domestic prices. The Bank of Korea raised the base rate from 2.50% to 2.75% in its July monetary policy direction. While the semiconductor boom is considered a key factor in raising South Korea's growth rate forecast, whether the recovery in manufacturing as a whole is evenly distributed remains a separate issue. KDI assessed in its July economic trends that while manufacturing production has adjusted, the South Korean economy has maintained a gradual improvement trend thanks to strong semiconductor exports and the service sector. The next monetary policy direction decision meeting of the Bank of Korea will be held on August 27.