Historically, since 1995, the decrease in U.S. interest rates has led to a crash in the Korean stock market. When the U.S. cut rates, our stock market had already dropped from 2,900 points to 2,400 points, a decline of 500 points. However, leading up to the actual rate cut, foreigners had been selling. This could mean that while inflation has stabilized enough to allow for a rate cut, there is fear that the economy may worsen, prompting the rate cut. 

Hello, I am economist Hong Chun-wook. Finally, the era of interest rate cuts has arrived. After four years, we will discuss whether this will bring about change. From the perspective of the asset market, you can think of it as the value of money rising or falling. So, if you have deposits in the bank earning 3.5%, it indicates that interest rates have risen, whereas a few years ago, deposit rates were at 0.5%. That was the kind of period we experienced.

When it comes to money, its value significantly decreases. So, the time when money was said to be copied was back then. Similarly, when interest rates rise, the value of money increases, and conversely, when interest rates rise, the value of money decreases. This is how you should understand it. This is referred to as the neutral interest rate. My rough estimate is that it is around 3% for the U.S., while for us, it seems to be less than 2%. I'm not sure, as this fluctuates. Generally speaking, it seems that our country could lower it by about 1%, and the U.S. has already seen a reduction of about 4% to 5%. It looks like an additional reduction of around 1.5% would be appropriate. However, this is currently a judgment on what is deemed reasonable, and we have no idea how things will turn out in the future. This is just a speculative situation. I believe it needs to be addressed monthly, but I actually think it should have been done in August. So, both the U.S. and we are late.

If we had done 0.25 in July and 0.25 this time, the atmosphere would have been good. However, we didn't do it then and now we did 0.5. I believe it happened because we missed the timing. The Bank of Korea should have acted in August, but now it's been pushed to October. Anyway, looking at the recent statistics related to household debt, the issue lies with the financial sector. It's not just the banks, but also other financial institutions, especially those where the deposit balances are decreasing. Money is flowing out, and if that continues, it can lead to economic problems. As we have always experienced in the past, like during the 2002 credit card crisis and the 2011 savings bank crisis, if we try to address minor issues after they become major problems, the economy ends up suffering tremendously. This has been our experience, and it happened again in 2022.

There was also the Legoland incident. When I think about such things, I believe it is necessary to lower the interest rates in advance to prevent accidents. However, it seems that the Bank of Korea has a different perspective, which worries me. But this situation cannot last long. Fundamentally, the government does not have the ability to control interest rates. You can think of it that way. To put it simply, while they may be able to prevent immediate issues, ultimately, the lending rates are determined based on the costs associated with loans that financial institutions experience. If the Bank of Korea lowers the policy rate to 3.2%, then even if the lending rate is at 5%, the margin increases by 1.75%, right? The lending rate is 5%, and the deposit rate would drop to 3.2%. So, what starts to emerge from this situation? As you all know, banks will be accused of making money off interest.

When such an environment is created, banks that want to quickly capture high-quality customers to expand their sales, such as internet banks, come to mind. How do regional banks respond? They will offer special loans. It seems that government regulations have an immediate effect, but it won't last long. Conversely, even when the government lowers interest rates, there are times when they raise them again. This is because if they feel the need to recover loans, they will increase interest rates. However, banks are currently making good profits, and while there are issues with store loans, the overall lending in the banking sector remains sound. The problem lies with non-bank loans; collateral loans in the banking sector are not a major issue. Although the delinquency rate has slightly increased, it is still at historically low levels. The real concern lies with corporate loans, particularly real estate project financing loans. In my opinion, regardless of what the government says, if the policy interest rate is lowered, loans will follow.

Interest rates will eventually go down; that's how you should think about it. It could be true, but if they were in their right mind, they wouldn't be raising interest rates. However, there are times when the Bank of Japan doesn't seem to be in its right mind, which is a big problem. It is the most incompetent central bank in the world, and it is going back to that state. From the end of 2012 until early 2023, it was arguably the most active central bank in the world. Now, it is returning to being a conservative, outdated central bank. Looking at global oil prices and various commodity prices, everything is crashing. Yet, they are making ridiculous statements about raising interest rates because they are worried about inflation. They probably don't even know why they need to raise interest rates, but they have concluded that they will do it and are trying to find justification for it.

I'm worried that it might be the case. Yes, that could happen. Historically speaking, since 1995, the decrease in U.S. interest rates has led to a crash in the Korean stock market. In fact, even this time, before the U.S. interest rate cuts, our stock market already fell from 2,900 points to 2,400 points, a drop of 500 points. As we can see from these examples, while the interest rate cuts in the U.S. might lead to a decline in asset values, looking at the reasons for the rate cuts in Korea, it seems that foreign investors sold off before the cuts. This could mean that the interest rates were lowered due to a poor economy. While it’s possible to say that the interest rates were lowered because inflation stabilized, if the rates were cut out of fear of a worsening economy, that’s a bad sign. Especially for our country, exports to major markets are very difficult right now, and with the European economy also struggling, our exports are largely limited to Southeast Asia, the U.S., and India.

If the economy worsens in the U.S., our country's exports will collapse again, and then we will have to sell our stocks. Yes, various fears are acting in combination. Looking at the exchange rate alone, the value of the U.S. dollar has fallen a bit compared to before, which suggests that the money that was leaving our country might come back in. This is one perspective. On the other hand, there is the fear of an economic downturn, which means we are not as strong as the U.S. There is a possibility of that happening, but it must be based on a soft landing for the U.S. If the U.S. faces a recession and has to quickly lower interest rates, the markets that would be most affected are those of South Korea, Taiwan, and China. Wouldn't that be the case? We describe countries like ours as being at the end of a whip; even a slight shake in the consumer market of developed countries can feel like being at the end of that whip.

As countries make even slight changes towards vegetarianism, it can cause significant problems because the economy is greatly impacted. Therefore, everyone is praying for a soft landing in the U.S. However, simply praying won't solve the issue. The reality is that it depends on whether Trump will be in power or not, and whether recent events in the Middle East, such as the bomb explosion in Beirut, will trigger further wars. Given the current conditions we face, with the economy not doing well, we should consider that interest rates are likely to remain low. This is why a balanced portfolio is necessary. That's why I recommend buying Korean government bonds and gold; it's for this reason. There is a possibility of issues arising. The problem is that the weak links may struggle to maintain high interest rates, and when they finally lower rates, they may burst under pressure.

Because the reason for the interest rate cut is inflation, that would be a big problem. However, I don't see any countries that could cause a significant shock to the global economy at the moment. Well, Russia is actually out of the financial markets, and Turkey and a few other countries seem to be having some issues, but when you look closely at the statistics of those countries, the reality is that there aren't many that seem on the verge of collapse. So, if the U.S. manages a soft landing, emerging markets could actually improve. I still hold onto hope. You posed a very difficult question today. In fact, interest rate cuts are generally bad news. If there was an interest rate cut and there was no instability, then that would be truly good news, reminiscent of the economic boom of the 1990s. Whether that will happen or if this interest rate cut is also too late will take a few more months to clarify.

판별이 날 테니까, 그래서 금융시장의 참가자들이 하루마다 오르락내리락 하는 것이 이런 것 때문인 것 같고요. 그런 면에서 놓고 볼 때, 밸런스 있는 포트폴리오, 특히 저희 프리즘 투자 자문에서 운영하고 있는 포트폴리오의 아이디어들은 한번 여러분들도 함께 공유하시면 좋지 않을까 생각해 봤습니다. 지금까지 홍춘이었습니다. 감사합니다.

금리인하 시작, 돈을 지키며 불리는 자산배분 투자전략 알려드립니다.

"환율의 미래"와 "프랑스 탐방기" 등 10여권의 책을 쓴, 이코노미스트 홍춘욱입니다. 25년 넘게 이코노미스트 일을 하면서, 반복되는 질문에 답하느라 힘들었는데.. 동영상을 통해 자주 묻는 질문에 대해 쉽게 답하고자 합니다.


*비지니스문의 : hong8706@us-all.co.kr
*강연 문의: https://c11.kr/19l7h


금리인하 시작, 돈을 지키며 불리는 자산배분 투자전략 알려드립니다.

금리인하 시작, 돈을 지키며 불리는 자산배분 투자전략 알려드립니다.

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