Interest Rate Hike Raises Expectations for Financial Market Normalization

Many entities focused solely on short-term performance, i.e., achieving KPIs, when making investments, which ultimately led to leverage operations focused on short-term profits.

The Korean financial market suffers from a shortage of skilled financial professionals and experienced personnel, with only a few successfully established. A regulation-centric, rigid, nationalistic financial system makes it difficult for these professionals to voice their opinions.

Excessive accountability for failure and public trials are frequent, and an unreasonable fear is often created under the pretext of eradicating market manipulation forces.

'Leading rooms' are registered as 유사금융업체 (similar financial services) and thus hold legal status. They lure individual investors with promises of high returns, advertising returns of 300%, 180%, or even 800% in just two months.

A distorted structure has emerged where 'leading rooms' generate better profits than institutional asset management companies, leading to significant harm for many individual investors.

Apollo has agreed to provide a $9 billion loan to SoftBank Vision Fund 2. Compared to SoftBank's past failure to secure a $10 billion loan collateralized by its OpenAI stake, this news suggests a recovery in market confidence in the AI sector.

Coreweave's capital increase and unsecured convertible bond issuance plan are also underway, indicating an improving funding environment for AI data center-related companies. A positive view on AI growth is being reconfirmed across the market.

Major semiconductor companies like Nvidia, Broadcom, and Micron rose by more than 5%.

Intel recorded a high increase of 7%, AMD 6%, and ARM 8.5%, while SK Hynix ADR also rose by 4.6%.

Amid ongoing geopolitical risks, oil price volatility was observed. WTI briefly fell below $100 after Saudi Arabia conveyed its intention to reach a ceasefire with Yemen's Houthi rebels via Oman.

However, oil prices rebounded following hawkish remarks from former President Trump regarding Iran, showing a mixed trend.

Currently, more attention should be paid to refined oil prices than crude oil prices. Refined oil prices serve as key indicators for CPI (Consumer Price Index) and PPI (Producer Price Index).

Currently, gasoline prices are maintaining around $3.45 per gallon.

This is higher than last month's 2.9%, and a significant 0.4% increase month-over-month.

Core inflation rose 2.4% year-over-year, and concerns are growing that prices could rise further due to the September oil price increase.

It rose 0.2% month-over-month.

This rise in the producer price index is likely to transfer to consumer prices in the future.

Both US housing permits and housing starts showed a declining trend. The Philadelphia Fed Manufacturing Activity Index also fell significantly compared to the previous month, indicating a slowdown in manufacturing activity.

In contrast, initial jobless claims decreased to 190,000, showing a stable employment market.

In the past, it was unimaginable for Korea's interest rates to be lower than those of the United States. However, starting in 2024, the interest rate gap between the US and Korea widened, and Korea's interest rates began to fall below those of the US.

This widening interest rate differential is a major factor driving the appreciation (weakening) of the Korean won. It shows that interest rate differences are a key variable in determining exchange rates.

The case where the Korean won exchange rate fell as the interest rate gap narrowed after the inauguration of Bank of Korea Governor Rhee Chang-yong clearly demonstrates the impact of interest rate differences on exchange rates. The interest rate gap between Korea and the United States is expected to have a significant impact on future exchange rate volatility.

This is because China is in a typical deflationary situation.

Since China's exchange rates and interest rates are managed under socialist control, they exhibit exceptional movements that deviate from general economic logic.