WEBVTT - Seok Gil Park on South Korea (Radio)

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<v Speaker 1>Let's talk a little bit more about the Korean economy

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<v Speaker 1>with our guest Skill Park. He is Korea economist at

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<v Speaker 1>JP Morgan. He joins us from Seoul. Sakil. Thank you

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<v Speaker 1>so much for being with us. Uh, correct me if

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<v Speaker 1>I'm wrong, But twenty five basis points wasn't that at

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<v Speaker 1>the low end of estimates in terms of what the

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<v Speaker 1>market was expecting from the Bank of Korea yesterday? Uh? Yeah,

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<v Speaker 1>Actually the twin five basics point hike was in nine

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<v Speaker 1>with the expectation UM the deal place to step was

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<v Speaker 1>much moderate than what is happening in the United States

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<v Speaker 1>because the governation sext himself explained the last time that

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<v Speaker 1>Korea twenty five or fifty basics point hide may have

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<v Speaker 1>a larger impact than the US given Uh, the household

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<v Speaker 1>credits mostly UM using the term with the floating interest rates,

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<v Speaker 1>so the impact may be higher. So you know, I

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<v Speaker 1>think if basics well was well expected by the market. Yeah,

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<v Speaker 1>we were hearing a lot about the possibility of a

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<v Speaker 1>fifty basis point increase. That's why I asked the question,

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<v Speaker 1>particularly when you look at the latest treading on producer

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<v Speaker 1>prices for the month of October coming in at a

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<v Speaker 1>rate of seven point three percent year on year. So

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<v Speaker 1>clearly at this point South Korea is still fighting inflation

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<v Speaker 1>in a major way. Uh, that's right. But in the

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<v Speaker 1>high frequency data wise we do the stabilizing oil prices,

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<v Speaker 1>and also in the coin place and side of the

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<v Speaker 1>the constanto inflation. Actually it was quite uh strong in

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<v Speaker 1>the summer months, but we are looking at so hopefully

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<v Speaker 1>we're looking at and all these signs of tapering off. Yeah,

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<v Speaker 1>you're right, the PPI noble was strong, but the normally

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<v Speaker 1>created CPI full of ality is so well more moderate

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<v Speaker 1>and the PPI inflation number implied for so I'll say

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<v Speaker 1>you have quite cautious, but still there on the right

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<v Speaker 1>direction for uh seeing the consumer inflation gradually stabilizing for

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<v Speaker 1>the end of next year, I think. So to what

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<v Speaker 1>extent do you think the b oka was guided by

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<v Speaker 1>a lot of the stress that we have seen in

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<v Speaker 1>the credit markets in South Korea, particularly short term credit

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<v Speaker 1>and some of the contraction that there has been in

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<v Speaker 1>that space with with yields UH spiking a bit, and

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<v Speaker 1>and you know, people just don't want to own it

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<v Speaker 1>right now. Yes, right, But actually yesterday the governor confirmed

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<v Speaker 1>our expectation that the UK's financial market stabilize and action

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<v Speaker 1>should not jeopardize it's mandate to stabilized inflation. So by

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<v Speaker 1>not injecting additional liquidity into the financial system, but by

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<v Speaker 1>preemptively stabilizing poke it with micrometers. So we also equal

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<v Speaker 1>the Governor's assessment that the Korean financial stability will remain.

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<v Speaker 1>Brobostis bite the possible product a volatility event, maybe in

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<v Speaker 1>the short term dequdity and credit market. Actually, I have

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<v Speaker 1>to thread the just is basically a domestic credit issue

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<v Speaker 1>and that be okay can fully handle if they have

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<v Speaker 1>an intention to do so. So we were talking a

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<v Speaker 1>moment ago about the minutes of the last FED meeting.

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<v Speaker 1>It seems as though they were taken to be pretty dubbish.

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<v Speaker 1>And I think the market here in the States is

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<v Speaker 1>assuming that the FED is going to downshift now to

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<v Speaker 1>a fifty basis point hike in December. So the level

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<v Speaker 1>of aggression maybe not nearly as intense as it was

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<v Speaker 1>in the beginning of the tightening cycle. That is not

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<v Speaker 1>to say that the FED is done. We can debate

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<v Speaker 1>what you think might be the terminal rate for the FED.

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<v Speaker 1>Is there a number that you have in mind is

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<v Speaker 1>it five? Is that five in the quarter, maybe as

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<v Speaker 1>much as five and a half percent for the fed's

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<v Speaker 1>terminal rate. UM. Actually our usc continue does have the

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<v Speaker 1>fat call. But besides that, the fat called the spilliver

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<v Speaker 1>from the fat policy rate in to crean plocy rate

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<v Speaker 1>is not mechanical UH in a sense that the BOK

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<v Speaker 1>follows the fat rate to some degree, but that's through

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<v Speaker 1>the inductory, through the effect market an effect market to

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<v Speaker 1>consumer inflation spiliver and consumer inflation deliver finally to the

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<v Speaker 1>polist rate decisions. So it's a multi stage process. And

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<v Speaker 1>recently what we are looking at is that there have

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<v Speaker 1>been some stabilization of crea one trade with basket weight,

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<v Speaker 1>that the value has been stabilized UM. I think to

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<v Speaker 1>some degree also reflected by the market effectation about the

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<v Speaker 1>BET terminal rate. And yes, I have to acknowledge that

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<v Speaker 1>that there remains some asserting piece on that. But still

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<v Speaker 1>in the BO case A side and the UH, their

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<v Speaker 1>decisions at least before the one is just based on

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<v Speaker 1>that currency consideration, maybe lesser than before, while that they

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<v Speaker 1>have some higher consideration for as you say, the domestic

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<v Speaker 1>credit issues. So I think it des allans to bake

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<v Speaker 1>the twin fire basics point high cnatifty. So recently we

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<v Speaker 1>saw trade data for the first twenty days of the month.

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<v Speaker 1>Some of the export numbers relatively soft, I think to

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<v Speaker 1>be okay, probably has a keen eye on semiconductor exupports.

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<v Speaker 1>I mean, is this an area of the economy that

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<v Speaker 1>you're watching closely? What are you seeing when you look

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<v Speaker 1>at exports, particularly semiconductors right now? Actually we are now

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<v Speaker 1>going through the town cycle of semiconductor in terms of

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<v Speaker 1>nominal gals, not the real goals actually s any conduct

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<v Speaker 1>the real expert gals and the real products and is

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<v Speaker 1>quite still quite strong. But what matter is now it's

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<v Speaker 1>process in falling along with inventory def stocking globally on

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<v Speaker 1>the memory chips though, but as you see in the

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<v Speaker 1>past ten years or so, uh, semiconductor pricess all like

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<v Speaker 1>always socially eating around the trend about the about the

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<v Speaker 1>few quarters flag. So uh cautiously we're expecting that movement,

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<v Speaker 1>the cyclical swing will come to an end by the

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<v Speaker 1>first half of next year and the slightly recover in

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<v Speaker 1>the second half. So yeah, that's the what is largely

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<v Speaker 1>are going through. We were talking a moment ago as

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<v Speaker 1>well about the COVID story in China. The spiking cases

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<v Speaker 1>were the record level. Many economists that we speak with

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<v Speaker 1>on this program who focus on China are looking at

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<v Speaker 1>a slower growth rate when you look at the extent

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<v Speaker 1>to which exports from South Korea entered China and there

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<v Speaker 1>may be some contraction in the demand part of that story,

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<v Speaker 1>Are you concerned that it has the potential to hold

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<v Speaker 1>back South Korean growth in a meaningful way? Um, you're right.

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<v Speaker 1>The China is one of the major trading parts in

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<v Speaker 1>of Korea, so it's a slowdown will affect Creates expert

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<v Speaker 1>performances next year. But what I do worry about the

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<v Speaker 1>next year, or what I do counted for the slowdown

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<v Speaker 1>for the Korean growth next year is the mainly consumer

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<v Speaker 1>demand because CREATE is now done with the initial pentop

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<v Speaker 1>demand initiating the all year this year. And also at

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<v Speaker 1>the same time you have two looking at slowdown in

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<v Speaker 1>the employment growth and also feeling tightness feeling the impact

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<v Speaker 1>of the titaned Hall of this from my chain fisical.

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<v Speaker 1>So that's what I'm expecting, that the consumer demand is

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<v Speaker 1>a cooling down next year, and that then maybe the

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<v Speaker 1>major drag in terms of the expert, Yes, it will

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<v Speaker 1>slow down, but we don't think it is a breaking down.

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<v Speaker 1>Interesting that the greatest risk right now is domestic when

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<v Speaker 1>you look at the South Korean economy, so Kale Park,

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<v Speaker 1>Korean economist for J. P. Morgan, thank you so much

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<v Speaker 1>for joining us here on Debrey Occasia