Speaker 1: Let's talk a little bit more about the Korean economy
Speaker 1: with our guest Skill Park. He is Korea economist at
Speaker 1: JP Morgan. He joins us from Seoul. Sakil. Thank you
Speaker 1: so much for being with us. Uh, correct me if
Speaker 1: I'm wrong, But twenty five basis points wasn't that at
Speaker 1: the low end of estimates in terms of what the
Speaker 1: market was expecting from the Bank of Korea yesterday? Uh? Yeah,
Speaker 1: Actually the twin five basics point hike was in nine
Speaker 1: with the expectation UM the deal place to step was
Speaker 1: much moderate than what is happening in the United States
Speaker 1: because the governation sext himself explained the last time that
Speaker 1: Korea twenty five or fifty basics point hide may have
Speaker 1: a larger impact than the US given Uh, the household
Speaker 1: credits mostly UM using the term with the floating interest rates,
Speaker 1: so the impact may be higher. So you know, I
Speaker 1: think if basics well was well expected by the market. Yeah,
Speaker 1: we were hearing a lot about the possibility of a
Speaker 1: fifty basis point increase. That's why I asked the question,
Speaker 1: particularly when you look at the latest treading on producer
Speaker 1: prices for the month of October coming in at a
Speaker 1: rate of seven point three percent year on year. So
Speaker 1: clearly at this point South Korea is still fighting inflation
Speaker 1: in a major way. Uh, that's right. But in the
Speaker 1: high frequency data wise we do the stabilizing oil prices,
Speaker 1: and also in the coin place and side of the
Speaker 1: the constanto inflation. Actually it was quite uh strong in
Speaker 1: the summer months, but we are looking at so hopefully
Speaker 1: we're looking at and all these signs of tapering off. Yeah,
Speaker 1: you're right, the PPI noble was strong, but the normally
Speaker 1: created CPI full of ality is so well more moderate
Speaker 1: and the PPI inflation number implied for so I'll say
Speaker 1: you have quite cautious, but still there on the right
Speaker 1: direction for uh seeing the consumer inflation gradually stabilizing for
Speaker 1: the end of next year, I think. So to what
Speaker 1: extent do you think the b oka was guided by
Speaker 1: a lot of the stress that we have seen in
Speaker 1: the credit markets in South Korea, particularly short term credit
Speaker 1: and some of the contraction that there has been in
Speaker 1: that space with with yields UH spiking a bit, and
Speaker 1: and you know, people just don't want to own it
Speaker 1: right now. Yes, right, But actually yesterday the governor confirmed
Speaker 1: our expectation that the UK's financial market stabilize and action
Speaker 1: should not jeopardize it's mandate to stabilized inflation. So by
Speaker 1: not injecting additional liquidity into the financial system, but by
Speaker 1: preemptively stabilizing poke it with micrometers. So we also equal
Speaker 1: the Governor's assessment that the Korean financial stability will remain.
Speaker 1: Brobostis bite the possible product a volatility event, maybe in
Speaker 1: the short term dequdity and credit market. Actually, I have
Speaker 1: to thread the just is basically a domestic credit issue
Speaker 1: and that be okay can fully handle if they have
Speaker 1: an intention to do so. So we were talking a
Speaker 1: moment ago about the minutes of the last FED meeting.
Speaker 1: It seems as though they were taken to be pretty dubbish.
Speaker 1: And I think the market here in the States is
Speaker 1: assuming that the FED is going to downshift now to
Speaker 1: a fifty basis point hike in December. So the level
Speaker 1: of aggression maybe not nearly as intense as it was
Speaker 1: in the beginning of the tightening cycle. That is not
Speaker 1: to say that the FED is done. We can debate
Speaker 1: what you think might be the terminal rate for the FED.
Speaker 1: Is there a number that you have in mind is
Speaker 1: it five? Is that five in the quarter, maybe as
Speaker 1: much as five and a half percent for the fed's
Speaker 1: terminal rate. UM. Actually our usc continue does have the
Speaker 1: fat call. But besides that, the fat called the spilliver
Speaker 1: from the fat policy rate in to crean plocy rate
Speaker 1: is not mechanical UH in a sense that the BOK
Speaker 1: follows the fat rate to some degree, but that's through
Speaker 1: the inductory, through the effect market an effect market to
Speaker 1: consumer inflation spiliver and consumer inflation deliver finally to the
Speaker 1: polist rate decisions. So it's a multi stage process. And
Speaker 1: recently what we are looking at is that there have
Speaker 1: been some stabilization of crea one trade with basket weight,
Speaker 1: that the value has been stabilized UM. I think to
Speaker 1: some degree also reflected by the market effectation about the
Speaker 1: BET terminal rate. And yes, I have to acknowledge that
Speaker 1: that there remains some asserting piece on that. But still
Speaker 1: in the BO case A side and the UH, their
Speaker 1: decisions at least before the one is just based on
Speaker 1: that currency consideration, maybe lesser than before, while that they
Speaker 1: have some higher consideration for as you say, the domestic
Speaker 1: credit issues. So I think it des allans to bake
Speaker 1: the twin fire basics point high cnatifty. So recently we
Speaker 1: saw trade data for the first twenty days of the month.
Speaker 1: Some of the export numbers relatively soft, I think to
Speaker 1: be okay, probably has a keen eye on semiconductor exupports.
Speaker 1: I mean, is this an area of the economy that
Speaker 1: you're watching closely? What are you seeing when you look
Speaker 1: at exports, particularly semiconductors right now? Actually we are now
Speaker 1: going through the town cycle of semiconductor in terms of
Speaker 1: nominal gals, not the real goals actually s any conduct
Speaker 1: the real expert gals and the real products and is
Speaker 1: quite still quite strong. But what matter is now it's
Speaker 1: process in falling along with inventory def stocking globally on
Speaker 1: the memory chips though, but as you see in the
Speaker 1: past ten years or so, uh, semiconductor pricess all like
Speaker 1: always socially eating around the trend about the about the
Speaker 1: few quarters flag. So uh cautiously we're expecting that movement,
Speaker 1: the cyclical swing will come to an end by the
Speaker 1: first half of next year and the slightly recover in
Speaker 1: the second half. So yeah, that's the what is largely
Speaker 1: are going through. We were talking a moment ago as
Speaker 1: well about the COVID story in China. The spiking cases
Speaker 1: were the record level. Many economists that we speak with
Speaker 1: on this program who focus on China are looking at
Speaker 1: a slower growth rate when you look at the extent
Speaker 1: to which exports from South Korea entered China and there
Speaker 1: may be some contraction in the demand part of that story,
Speaker 1: Are you concerned that it has the potential to hold
Speaker 1: back South Korean growth in a meaningful way? Um, you're right.
Speaker 1: The China is one of the major trading parts in
Speaker 1: of Korea, so it's a slowdown will affect Creates expert
Speaker 1: performances next year. But what I do worry about the
Speaker 1: next year, or what I do counted for the slowdown
Speaker 1: for the Korean growth next year is the mainly consumer
Speaker 1: demand because CREATE is now done with the initial pentop
Speaker 1: demand initiating the all year this year. And also at
Speaker 1: the same time you have two looking at slowdown in
Speaker 1: the employment growth and also feeling tightness feeling the impact
Speaker 1: of the titaned Hall of this from my chain fisical.
Speaker 1: So that's what I'm expecting, that the consumer demand is
Speaker 1: a cooling down next year, and that then maybe the
Speaker 1: major drag in terms of the expert, Yes, it will
Speaker 1: slow down, but we don't think it is a breaking down.
Speaker 1: Interesting that the greatest risk right now is domestic when
Speaker 1: you look at the South Korean economy, so Kale Park,
Speaker 1: Korean economist for J. P. Morgan, thank you so much
Speaker 1: for joining us here on Debrey Occasia