BNY’s Geoff Yu highlights a hawkish 25bp hike by the Bank of Korea (BoK) to 2.75%, with guidance that Gross Domestic Product (GDP) and core inflation will exceed earlier forecasts. Authorities are also tightening rules on single-stock leveraged ETF/ETN products to curb speculative leverage in memory chip names. Asian semiconductor stocks, including SK Hynix and Samsung Electronics, have slumped, weighing on KOSPI and USD/KRW.

Hawkish BoK and chip-led risks

"The BoK has raised its base rate by 25bp to 2.75% in a unanimous 7-0 decision, citing stronger-than-expected growth, sticky inflation and rising financial stability risks. The board struck a more hawkish tone, signaling that further hikes remain under consideration. It said GDP is likely to be considerably higher than forecast in May, when it was seen at 2.6%."

"Inflation is expected to remain elevated for a prolonged period despite lower oil prices, with core inflation now projected to exceed the May forecast of 2.4%, while headline inflation is expected to hold at 2.7%. The central bank highlighted robust semiconductor-led exports, firm investment and improving domestic demand, alongside faster house price gains, higher household debt and exchange rate volatility."

"Asian semiconductor stocks slumped after a sharp selloff in U.S. chipmakers, with the weakness driven by profit-taking and renewed caution over lofty AI-related valuations rather than any clear deterioration in fundamentals. SK Hynix fell 11.5% in Seoul after recent extreme volatility, while Samsung Electronics dropped more than 8% and other South Korean chip names also declined."

"South Korea’s authorities have announced supplementary measures on single-stock leveraged ETF/ETN products. The move is aimed at curbing overheating, strengthening investor protection and reducing the risk of further volatility in memory chip names amid rapid growth in these products since launch."

"New listings of single-stock products, including inverse and covered call variants, will be temporarily suspended until markets stabilize, and advertising and event marketing will be banned. Risk controls will be tightened through lower LP deviation thresholds, tougher penalties, faster designation of risky products, expanded pre-investor education and automated risk alerts."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)