Han Eun “Warning for Korean investors… High economic uncertainty, expanding asset price volatility”

Enter 2021.03.11 12:00

BOK “cannot rule out the possibility of asset price adjustment”
Risk of expansion of borrowing investment such as personal’debt investment’

The Bank of Korea issued a’warning’ to domestic asset investors on the 11th. If expectations for monetary policies in major countries and the spread of vaccines and the re-proliferation of the novel coronavirus infection (Corona 19) are different from the forecast due to concerns about increasing inflation risks in the future, volatility such as domestic and overseas asset price adjustments may increase. The BOK recently viewed the expansion of borrowing investments such as’debt investments’ by individual investors as a risk factor.

The BOK released the Monetary Credit Report on the same day and said, “The domestic and foreign financial markets continued to prefer risky assets due to the anticipation of an economic recovery following the promotion of the new government’s economic stimulus measures and the expansion of the Corona 19 vaccine in major countries.” Long-term market interest rates have risen due to expectations, and the stock price has temporarily expanded in January, but remains at a high level despite concerns over overvaluation.”

“In the credit market, the spread of speculative-grade corporate bonds has been greatly reduced, and the sense of credit alertness has eased, while in emerging countries, bond spreads have narrowed and fund inflows have continued.” And the market volatility is increasing somewhat, such as a sharp fluctuation in stock prices,” he said.

“In Korea, stock prices and interest rates showed a similar trend with the international financial market. In the meantime, domestic and foreign stock investment by individual investors has greatly expanded, and financing through borrowing from financial institutions has also increased.” “The risk preference seems to have played a large role in the prospect of economic recovery, but the expectation that the easing monetary policy will continue for a considerable period of time due to low inflation, etc.”

A BOK official said, “As the economic uncertainty is high, we cannot rule out the possibility that volatility such as asset price adjustments will increase in the domestic and overseas financial markets.” “It is necessary to carefully check the risk factors such as the risk preference situation of the market and the movement of major price variables.”