The Bank of Korea (BOK) forecast that the global semiconductor industry will remain strong for a considerable period. It also predicted that domestic stocks are unlikely to shift into a downward trend.
In a work report submitted to the National Assembly's Finance and Economy Planning Committee on the 9th, the BOK stated, "Going forward, the global semiconductor industry is expected to continue expanding for a considerable period on the back of expanding artificial intelligence (AI) applications and related infrastructure investment."
The BOK explained, "This assessment reflects rising computing demand driven by the spread of AI, continued investment by major big tech firms to secure market leadership, and constraints on supply expansion due to high process difficulty." It added, "However, financial market adjustments stemming from concerns over AI profitability, reduced physical investment by big tech, and energy bottlenecks remain as downside risks."
On the future outlook for domestic prices, the BOK said upward pressure exists from increased demand. "The consumer price inflation rate could fall as international oil prices decline amid easing tensions in the Middle East, but improvements in consumption and investment, as well as the pass-through effects of cost shocks, act as upward pressure on prices," the BOK said. It added, "There is a possibility that demand-side price pressure will gradually increase due to improved income and asset conditions and expanded investment stemming from the strong semiconductor industry," forecasting that "the inflation rate will continue to remain above the target level (2%)."
Regarding the future of domestic stocks, the BOK viewed a shift into a downward trend as unlikely. "Since May, domestic stocks have seen large fluctuations amid the added effects of profit-taking by foreign investors and semiannual portfolio rebalancing," the BOK said. "Going forward, stock prices will continue to show high volatility, influenced by concerns related to the AI industry, the monetary policy stance of major economies, and changes in global capital flows."
It added, "However, considering that upward revisions to operating profit forecasts for semiconductor companies are continuing, along with the government's efforts to improve capital market systems, the possibility of domestic stock prices shifting into a downward trend is limited."
Regarding the won-dollar exchange rate remaining at the 1,500 won level, the BOK stressed, "The won has depreciated more sharply than the currencies of major countries, as risk-averse sentiment increased due to the impact of risks in the Middle East region and was compounded by the effect of net stock selling by foreigners." It added, "Korea's external borrowing conditions and domestic foreign currency liquidity conditions continue to remain sound, but we will continue efforts to stabilize the market, mindful that market volatility could increase if external risks grow."
