Korea Economic Daily

Wall Street’s three major stock indexes ended the session mixed with no clear direction. Analysts said the market has entered a pause as profit-taking emerged after two days of gains. On the 23rd (local time), at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 285.3 points (0.58%) from the previous session to close at 49,098.7. The Standard & Poor’s (S&P) 500 rose 2.26 points (0.03%) to 6,915.61, while the Nasdaq Composite gained 65.22 points (0.28%) to finish at 23,501.24. All three indexes opened lower. Comments by U.S. President Donald Trump the previous afternoon that “a large U.S. naval fleet is heading toward Iran to prepare for contingencies” stoked investors’ risk-off sentiment. However, as bargain hunting emerged after the open, the three indexes moved in different directions. Sentiment diverged by sector. Big Tech—which had risen less relative to others—gained momentum, while semiconductor-related stocks that had dominated the market in recent days fell more than 1%. As a result, the Dow, weighted toward traditional industrial and blue-chip names, stayed in the red throughout the session, while the tech-heavy Nasdaq turned higher. Intel in particular slumped on disappointing guidance. Intel said it expects first-quarter revenue between $11.7 billion and $12.7 billion, below the market’s average estimate of $12.51 billion. Intel shares fell 17% in a single day. Intel’s plunge dragged other chipmakers lower. The Philadelphia Semiconductor Index fell 1.21%, and Broadcom, ASML, Qualcomm and Arm, among others, declined 1–2%. As money flowed into Big Tech, Microsoft rose 3.28%, Amazon 2.06%, Meta 1.72% and Nvidia 1.53%. Investors are now shifting their focus to the Federal Open Market Committee (FOMC) meeting scheduled for next week, on the 27th–28th, and to the next chair of the U.S. central bank. Treasury Secretary Bessent had said President Trump would name the next U.S. central bank chair next week. By Seulgi Lee, Hankyung.com, seulkee@hankyung.com

Director-level appointments at the Ministry of Finance and Economy Lee Hyung-ryeol named new Director-General for International Finance Major reshuffle in the international finance line signaled The Director-General for International Finance at the Ministry of Finance and Economy, who is responsible for stabilizing the exchange rate, was replaced on the 23rd. Lee Hyung-ryeol, former Policy Coordination Officer (director-general; 40th class of the civil service exam) who was appointed to a key director post on the policy line two months ago, was named the new Director-General for International Finance. With the high exchange rate in the KRW 1,400 range showing little sign of easing, some are assessing that the appointment reflects the Blue House’s intent that unconventional measures—rather than traditional approaches—are needed to stabilize the currency. Lee began his public service career in the Financial Policy Division and went on to serve as head of the Foreign Exchange System Division and the Foreign Currency Funding Division, as well as head of the International Economic Affairs Coordination Division. Up through his time as a division chief, he was classified as part of the international finance line. After being promoted to director-general, he took on other portfolios, including Economic Supply Chain Planning Officer, International Tax Policy Officer, and Director-General for Policy Coordination. Analysis that this signals a major reshuffle of the international finance line is gaining traction, given that he moved to the Director-General for International Finance post just two months after being appointed Director-General for Policy Coordination, one of the key positions on the policy line, in November last year. Kim Yong-beom, the Blue House policy chief, is said to have rebuked the international finance line several times recently as the high exchange rate persisted, saying they were "trapped in dogma" (doctrinaire belief). Because Lee had not been considered among the next candidates for the Director-General for International Finance within the ministry, the move is being described as a surprise appointment. A ministry official said, "There had been talk that the Blue House would replace much of the international finance line, but rather than bringing in a completely new figure, it appears they are trying to refresh the atmosphere by putting forward someone with international finance experience." There is also an interpretation that the appointments were not aimed specifically at the international finance line. That is because the 40th and 41st classes of the civil service exam were placed across key director posts. Most officials previously mentioned as the next Director-General for International Finance were bureaucrats from the late 30th classes. On the day, the ministry announced a set of director-level appointments, naming Kim Byung-cheol (40th class) as Director-General for Comprehensive Tax Policy; Kim Gu-nyeon (41st class) as Policy Planning Officer; Joo Hwan-wook (40th class) as Policy Coordination Officer; and Kim Geon-young (40th class) and Shin Sang-hoon (41st class) as Director-General for Property and Consumption Tax Policy and Director-General for Economic Structure Reform, respectively. Another ministry official said, "With most of the Grade 1 positions filled by the 39th class, director-level posts were assigned to the 40th class," adding, "Senior directors will naturally step back to the second line." Appointments for the Director-General for Economic Policy, who is responsible for macroeconomic policy, are expected to be made after the Grade 1 reshuffle is completed. Jung Young-hyo/Lee Gwang-sik, reporters hugh@hankyung.com

Kakao Pay heads straight to the daily limit-up "Rising expectations for legislation on digital assets" Pay soared to the daily limit-up in the stock market on the 23rd on expectations that legislation for stablecoins will be put in place. On the day, closed at 67,800 won, up 15,600 won (29.89%) from the previous session. Along with Kakao Pay, (8.15%), Kakao (4.28%), (9.11%), and (9.56%) also jumped. On expectations tied to security tokens (STOs), and also showed strength. In the Kosdaq market, (30.0%), KCP (29.94%), (29.94%), (29.93%), (26.8%), and (19.4%) surged. The rally in these companies is interpreted as stemming from renewed expectations for legislation of digital assets such as stablecoins and security tokens. It was reported that Rep. Min Byung-duk of the Democratic Party of Korea mentioned digital assets at a luncheon of the KOSPI 5000 Special Committee hosted by President Lee Jae-myung the previous day. Rep. Min reportedly argued at the event that digital assets should be leveraged to push the Kosdaq above 3,000, citing the example of a won-denominated stablecoin. He is also said to have proposed that Kosdaq-listed companies could help energize the market if they make use of digital assets. Stablecoin-related stocks were leaders that drove the so-called ‘Lee Jae-myung rally’ immediately after President Lee’s inauguration in June last year. Kakao Pay in particular saw its share price jump from the 20,000-won range before his inauguration to the 110,000-won range in just three weeks after, posting a 295% gain over the period. Unlike other cryptoassets, stablecoins are digital assets that aim for price stability by pegging their value to specific assets such as the U.S. dollar, the euro, U.S. Treasuries, and gold, while also pursuing the convenience of cryptoasset payments. This contrasts with typical cryptocurrencies such as bitcoin, which lack fixed-asset backing and are highly volatile. Security tokens are ‘securities’ under the Capital Markets Act that digitize real-world assets using distributed ledger technology. They make it possible to trade, like stocks, real assets such as real estate, artworks, and music copyrights—previously difficult to capture with conventional electronic securities—as well as non-standard assets and rights such as environmental, social and governance (ESG) interests and content intellectual property (IP). Earlier, Rep. Min spearheaded the introduction of the ‘Basic Act on Digital Assets.’ The bill includes provisions to establish a presidentially affiliated Digital Assets Committee to strategically foster related industries at the national level and coordinate policy, and to legally permit the issuance of digital assets. However, the legislative process has failed to gain momentum as coordination among relevant authorities, including over the direction of regulation, has been delayed. The Democratic Party reportedly held a Digital Assets Task Force (TF) meeting on the 20th and began work to craft a unified party proposal. The plan is to finalize its own bill promptly rather than wait for a government proposal, and to lead discussions in the National Assembly’s Political Affairs Committee. According to the industry, the global market for tokenized digital securities is expected to expand to $5 trillion by 2030. Quinlan & Associates, a Hong Kong-based management consultancy, forecast that STOs will account for 42.9% of global securities trading value by 2030, growing to about $162.7 trillion. Kim Ji-won, an analyst at KB Securities, said, "If STOs are legislated, we can expect fractional securities for a wide range of real assets—such as real estate, infrastructure, private credit, intellectual property and K-content—to be brought into the regulated market," adding, "If linked with tokenized payment instruments such as stablecoins and central bank digital currencies (CBDCs), transaction and capital efficiency could rise significantly, so it will be necessary to watch additional institutional reforms and the process of building out infrastructure." Noh Jeong-dong, Hankyung.com reporter dong2@hankyung.com

KOSDAQ up 2.4% to close at 993 Institutions post record net buying of KRW 1 trillion Expectations build for government policy support The KOSDAQ market, which had lagged somewhat compared with the KOSPI—whose intraday level topped 5,000 this year—is heating up. On the 23rd, institutional investors bought a record amount of shares on the KOSDAQ on expectations of the government’s policy drive to revitalize the market. Some forecasts say the KOSDAQ could stage a “catch-up rally” to match the KOSPI. The KOSDAQ index closed up 2.43% from the previous day at 993.93, putting the “Chunsdaq” milestone within reach. A break above 1,000 would be the first in four years, since January 2022 when a global liquidity rally followed the spread of COVID-19. Institutions posted net buying of a record KRW 987.3 billion worth of shares on the KOSDAQ that day. The previous record was KRW 826.2 billion on Dec. 28, 2021. Biotech stocks that had fallen sharply recently rebounded, pushing the index higher. Heavyweight Alteogen rose 4.73%, while ABL Bio and Samchundang Pharm surged 10.24% and 13.74%, respectively. Expectations for government policy support also lifted risk appetite. The Democratic Party’s “KOSPI 5,000 Special Committee” was reported to have mentioned a target of KOSDAQ 3,000 during a closed-door luncheon with President Lee Jae-myung. Earlier, the government had signaled a range of measures to support the KOSDAQ, including the National Growth Fund and the injection of venture capital. Cautious calls are also emerging that the KOSDAQ’s rise could gather pace. Shin Jin-ho, CEO of Midas Asset Management, said, “A hallmark of the Lee Jae-myung administration is that it rolls out stock-market support measures consecutively,” adding, “Given its intent to improve the KOSDAQ market’s fundamentals, the KOSDAQ index is likely to trend higher.” Retail investors’ expectations have also grown after failing to generate big gains in a large-cap-led market. The retail-heavy KOSDAQ index is up 7.4% year to date, far below the KOSPI’s 18.41% rise over the same period. This year, individuals have been net buyers of KRW 872.0 billion on the KOSDAQ, while foreigners have been net sellers of KRW 408.3 billion. The KOSPI closed up 0.76% at 4,990.07. It again “touched” 5,000, rising to as high as 5,021.13 intraday, but pared gains on profit-taking. KOSPI Pauses After Hitting 5,000…Sideline Cash Nears KRW 100 Trillion Naver up 8%, Kakao up 4%…Hopes for Gains From Stablecoin Policy On the 23rd—the day after the KOSPI touched 5,000—the main board took a breather while the KOSDAQ strengthened. Expectations grew that the previously overlooked KOSDAQ could show a stronger trend ahead. With investors’ deposit balances—cash on the sidelines—nearing KRW 100 trillion, the prevailing view was that the KOSPI’s strength could also continue. ◇KOSPI Takes a Breather; KOSDAQ Strong The KOSPI ended the session at 4,990.07, failing to break above 5,000 on a closing basis. It climbed as high as 5,021.13 intraday, but profit-taking emerged, centered on Hyundai Motor Group shares. As gains narrowed, the index even briefly slipped into negative territory. Individuals posted net selling of KRW 726.7 billion, while institutions and foreigners were net buyers of KRW 491.6 billion and KRW 134.0 billion, respectively. Hyundai Motor, which had led the year-to-date rally, fell 3.59% from the previous session to close the regular session at KRW 510,000, and Korea Electric Power plunged 7.27% after a foreign brokerage downgraded its investment rating. On stablecoin policy expectations, Naver and Kakao jumped 8.35% and 4.45%, respectively. Brokerage stocks also surged on hopes for a bullish market, with Mirae Asset Securities and Shinyoung Securities rising 16.58% and 13.02%, respectively. Lee Kyung-min, a researcher at Daishin Securities, said, “Given the steep run-up, profit-taking emerged, centered on Hyundai Motor Group shares,” adding, “The KOSPI appears to have entered a consolidation phase after reaching 5,000.” The long-overlooked KOSDAQ posted a sharp rebound on strong institutional buying. Biotech names, which had slid in a streak following the “Alteogen shock,” managed to rebound. Alteogen had plunged 22.35% on the 21st after it was reported that the royalty rate it receives from global drugmaker Merck was far lower than market expectations. Alteogen rose 4.73% on the day to recover, while ABL Bio and Samchundang Pharm surged 10.24% and 13.74%, respectively. Ligachem Bio also gained 12.32%. ◇“KOSPI Isn’t Overheated” Forecasts are emerging that the KOSDAQ could attempt to close the gap with the KOSPI and remain strong. With the Democratic Party’s “KOSPI 5,000 Special Committee” mentioning a KOSDAQ 3,000 target during a closed-door luncheon with President Lee Jae-myung, the market expects a series of support measures. Expectations are that supply-demand conditions will improve through measures such as the National Growth Fund and the injection of venture capital. One asset management CEO said, “With government support policies, the KOSDAQ index could rise to the mid-1,000s.” The KOSPI, which briefly paused that day, is also expected to maintain its uptrend. Earnings momentum continues to improve, especially in semiconductors, and sideline cash is also setting record highs. Investors’ deposit balances stood at KRW 95.7276 trillion as of the 22nd, nearing KRW 100 trillion. Analysts say retail funds are shifting en masse into equities. Foreigners’ buying—net purchases of KRW 2.6761 trillion so far this year—is also expected to continue. While the U.S. S&P 500 and Nasdaq indexes are up 0.99% and 0.83%, respectively, Asian indexes have been strong. Along with the KOSPI’s 18.41% gain, Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index have risen 7.02% and 4.24%, respectively. Brokerages are continuing to raise their year-end ceilings for the KOSPI. Shinhan Investment Corp. forecast the KOSPI could climb to 5,850, while KB Securities and Korea Investment & Securities projected 5,700 and 5,650, respectively. NH Investment & Securities and Samsung Securities also forecast rises to 5,500 and 5,400, respectively. Lee said, “The recent KOSPI rise is earnings-driven, and the forward price-to-earnings ratio is only 10.5 times.” Reporter Park Han-shin phs@hankyung.com

Hanwha Investment & Securities has decided not to sell its stake in Dunamu held through Naver. As a comprehensive share swap between Naver Financial and Dunamu was being pursued, the possibility of a stake sale had been raised, but Hanwha Investment & Securities has opted to maintain its Dunamu holdings for the time being. According to the Financial Supervisory Service on the 23rd, Hanwha Investment & Securities disclosed that it has no plans to sell its 5.94% stake in Dunamu. While it reviewed a possible sale, it decided to hold the stake rather than realize gains, citing the medium- to long-term growth potential of the virtual-asset industry. Earlier, Dunamu and Naver Financial decided on a share swap in November last year. Under the deal, Naver Financial would bring Dunamu in as a wholly owned subsidiary. Before the merger is finalized, the possibility of an exit by major shareholders—including Hanwha Investment & Securities, Kakao Investment, and Woori Technology Investment—had been discussed. In this process, Hanwha Investment & Securities considered a plan to transfer its Dunamu stake to Naver. If Hanwha Investment & Securities opposes the integration of the two companies, it can exercise appraisal rights and sell its holdings at 439,252 won per share. That is more than 15 times its acquisition price in 2021 of 28,186 won per share. Reporter Choi Dae-eun max@hankyung.com

Easing trade tensions spur foreign and institutional buying KOSDAQ biotech shares ‘on fire’ The KOSPI rebounded above the 5,000 level intraday for the first time in a day as U.S.-Europe trade tensions eased amid a softening of controversy over Greenland’s annexation. The KOSDAQ is closing in on the so-called “Cheon-SDAQ” (KOSDAQ 1,000 points) milestone. On the 23rd, the KOSPI ended up 37.54 points, or 0.76%, from the previous session at 4,990.07. After opening up 0.64%, the index briefly rose as high as the 5,020 level (5,021.13), setting an all-time intraday high, but later reversed lower in the afternoon session, falling short of closing above 5,000. In New York, major indexes extended a relief rally for a second day as the Greenland annexation dispute abated. U.S. President Donald Trump said the previous day regarding the issue that “we will not use force,” adding that he would “withdraw the tariffs that were to be imposed on major European countries.” Sentiment was also supported by news that the United States, Ukraine and Russia agreed to hold their first trilateral talks aimed at ending the war. In the main board market, foreign investors and institutions posted net purchases of KRW 41.7 billion and KRW 515.3 billion, respectively. Retail investors were net sellers by KRW 653.6 billion. KOSPI heavyweights were mixed. SK hynix (1.59%), (1.35%), (2.28%), and (3.67%) rose, while Samsung Electronics (-0.13%), (-3.59%), and (-1.2%) fell. surged to its daily upper limit on expectations for legislation to legalize stablecoins. , , and also jumped as expectations grew that a more active stock market would translate into earnings. , which has rallied recently, tumbled in the 7% range on profit-taking. The KOSDAQ moved closer to the “Cheon-SDAQ” mark. The index gained 23.58 points, or 2.43%, to 993.93. It climbed as high as 998.32 intraday, approaching 1,000 points. On the KOSDAQ, biotech shares posted sharp gains, including (10.24%), (13.74%), (7.71%), (6.81%), and (12.32%). , the KOSDAQ’s largest stock by market cap, also rebounded 4.73% after a recent slump. Meanwhile, robot-related shares such as (-28.93%), (-27.62%), and (-21.41%) plunged as profit-taking emerged. The won-dollar exchange rate fell. In the Seoul foreign exchange market, the won-dollar rate ended daytime trading at 1,465.8 won, down 4.1 won from the previous session. Noh Jeong-dong, Hankyung.com reporter dong2@hankyung.com

Crypto infrastructure company BitGo got off to a solid start on its first day of trading on the New York Stock Exchange (NYSE), opening 25% above its IPO price. On the 22nd (local time), BitGo began trading at $22.43, up 25% from its IPO price of $18. The stock at one point surged as much as 36% to $24.5 intraday, but later gave back gains to close at $18.49. Based on the closing price, BitGo’s market capitalization is valued at about $2.1 billion. BitGo drew attention as the first major crypto company to pursue an initial public offering (IPO) this year. The company initially set an indicative price range of $15 to $17, but strong institutional demand during bookbuilding led to the final IPO price being set at $18. The Wall Street Journal (WSJ) said, “BitGo’s IPO offers a gauge of whether the crypto industry has entered a recovery phase after investor sentiment froze following the decline in crypto prices late last year.” There were no listings by major crypto companies in the fourth quarter of last year. According to Reuters, BitGo is one of the few crypto companies to be profitable. It posted net income of $35.3 million from January to September last year. Revenue in the first half of last year surged to $4.19 billion, nearly quadrupling from the prior year’s $1.12 billion. BitGo was founded in 2013 by Silicon Valley entrepreneur Mike Belshe. Belshe is credited with being the first to commercialize “multisignature wallet” technology, which requires multiple signatures to approve transactions. On the back of this security technology, BitGo initially grew around custody services for institutional clients, then expanded into brokerage and institutional trading services. It is also the custodian and an infrastructure provider for the stablecoin “USD1” of “World Liberty Financial,” led by the family of U.S. President Donald Trump. Reporter: Han Kyung-je

This is the result of a survey of 75 economists who were asked to rank Korea’s five risk factors in order. Concerns were raised that volatility in the foreign-exchange market is likely to increase. Experts pointed out that “FX authorities need to communicate clearly and transparently.” According to the Bank of Korea’s ‘Systemic Risk Survey Results’ released on the 23rd, the top risk factor was cited as “increased volatility in the domestic FX market, including the exchange rate.” This is based on responses from 75 economists who ranked Korea’s five risk factors. Some 66.7% pointed to the exchange rate, and 26.7% ranked it as the No. 1 risk. Many respondents viewed mainly domestic factors as risks, such as the high level of household debt (50.7%) and a sluggish domestic economy (32.0%). External factors cited included uncertainty over monetary policy in major economies (40.0%) and the possibility of a global asset-market price adjustment (33.3%). Respondents said an exchange-rate move and a global asset-market price adjustment are likely to occur. Household debt was identified as a factor with a major impact on the financial system. Compared with last year, the factors ranking near the top changed significantly. Last year, household debt, shifts in US policy, economic weakness, demographic changes, US supply-chain reshoring, and stress among self-employed borrowers were cited as concerns, but demographic and self-employment issues were pushed down the list. This year, worries about the exchange rate, global asset markets, and real estate in the Seoul metropolitan area newly moved into the top tier. Still, the likelihood of shocks that could undermine financial-system stability was assessed to have declined. The share of respondents who said a shock is likely within one year fell to 12.0% from 15.4% last year, and those who expected a shock within a 1–3 year horizon declined to 24.0% from 34.6%. Respondents called for risk management to brace for domestic and external uncertainty, and for policies to bolster credibility and predictability as ways to enhance the stability of Korea’s financial system. Specifically, they cited the need to stabilize and more closely monitor the FX and asset markets, and for policy authorities to communicate clearly and transparently. They also mentioned the need for a consistent policy mix to manage household debt in a stable manner and institutional efforts to address structural vulnerabilities by borrower segment and financial sector, as well as the need for an orderly restructuring of so-called zombie companies. By Kang Jin-kyu josep@hankyung.com

US President Donald Trump warned that a major US military force is moving toward Iran, where bloodshed has been triggered by anti-government protests. Speaking to reporters aboard Air Force One on the way back to the United States from Switzerland on the 22nd (local time), Trump said, "A lot of big ships are headed in that direction (Iran) just in case," adding, "We'll see what happens." He added, "I hope nothing happens, but we're watching them (Iran) very closely." Trump has reiterated that he would attack if the Iranian government kills participants in the anti-government protests, but he has reportedly not yet decided whether to take military action. Trump said that after his warning, the Iranian government called off the hangings of 837 protest participants, calling it "a good sign." Earlier, in an interview with Fox Business in Davos, Switzerland, Trump said of the possibility of military intervention over the bloody crackdown on Iran's anti-government protests, "I don't want to talk about it," adding, "I don't want to lock myself into any position. It would be foolish for me to say that (about the possibility of intervention)." He continued, "They were going to hang 837 people," adding, "I told them, in the strongest terms, not to do it, and they didn't," and stressed, "We'll see what happens next." He added, "People used to say Iran was the 'bully of the Middle East,'" and said, "Now they're no longer such an effective bully. They're all afraid of (the United States)." Hong Min-seong, Hankyung.com reporter mshong@hankyung.com

Major Wall Street indexes extended a relief rally as concerns over U.S.-Europe tariffs eased amid a de-escalation in tensions over Greenland’s annexation. On the 22nd (local time), at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 306.78 points (0.63%) from the previous session to close at 49,384.01. The Standard & Poor’s (S&P) 500 added 37.73 points (0.55%) to 6,913.35, while the tech-heavy Nasdaq climbed 211.20 points (0.91%) to end at 23,436.02. U.S. President Donald Trump said the previous day that he would not use force in relation to the Greenland annexation issue and that he would also withdraw tariffs he had planned to impose on major European countries. The news is seen as having quickly restored investor sentiment. The market also drew additional reassurance from plans for the United States, Ukraine, and Russia to hold their first-ever trilateral talks aimed at ending the war. Ukrainian President Volodymyr Zelenskyy said after a summit with Trump in Davos, Switzerland, “Starting on the 23rd, officials from the United States, Ukraine, and Russia will meet in the United Arab Emirates (UAE) for two days to discuss a peace proposal,” adding that “this meeting will be the first trilateral talks.” U.S. economic indicators remained solid. According to the U.S. Department of Commerce, the revised estimate of third-quarter real gross domestic product (GDP), on a seasonally adjusted basis, rose at an annual rate of 4.4% quarter-on-quarter. On a quarterly basis, it marked the strongest growth in two years since the third quarter of 2023 (+4.7%). Inflation data were also benign. The Commerce Department said the core PCE price index, which excludes volatile food and energy, rose 0.2% month-on-month in November, unchanged from October’s 0.2% gain. The headline PCE price index, which includes food and energy, also increased 0.2% month-on-month, matching October’s 0.2% rise. By sector, consumer discretionary and communication services rose more than 1%, while real estate fell more than 1%. By stock, most major tech names advanced. Tesla jumped 4.15% on reports it could expand its robotaxi service across the United States by year-end, while Meta gained 5.66%. Micron Technology, benefiting from a global shortage of memory semiconductors, rose another 2.18% on the day, with its market capitalization approaching $450 billion. Intel is plunging more than 6% in after-hours trading. Its fourth-quarter results beat expectations, but a disappointing outlook for first-quarter performance triggered heavy selling. Noh Jeong-dong, Hankyung.com reporter dong2@hankyung.com

House committee passes 'AI oversight' bill Dealings with China, North Korea, Russia, etc. Would require Commerce Department approval on a case-by-case basis A proposed “AI oversight” bill designed to allow Congress to intervene when advanced artificial intelligence (AI) semiconductors are exported to countries of concern such as China has cleared the committee of jurisdiction. According to Reuters, the US House Foreign Affairs Committee on the 21st (local time) passed the bill by 42 votes to 2. The legislation, which strengthens Congress’s oversight authority over AI semiconductor exports, was introduced by Committee Chairman Brian Mast after US President Donald Trump said last month he would allow exports of Nvidia’s H200 AI chips to China. It would require case-by-case Commerce Department licenses for exports of AI semiconductors whose performance exceeds certain thresholds to China, Cuba, Iran, North Korea, Russia, and Venezuela under the regime of Nicolás Maduro. It also requires the Commerce Department to submit relevant information to the responsible House committee at least 30 days before approving an export; if Congress, after reviewing the information, adopts a joint resolution to ban the export, the Commerce Department would be barred from granting approval. The South China Morning Post (SCMP) said, “Concerns are growing that President Trump may approve the sale of the latest high-performance chips to China at the US-China summit scheduled for April,” adding that “this bipartisan push is a rare case in Trump’s current term of Republican lawmakers breaking with the party line to check presidential authority.” Reuters reported that David Sacks, the Trump administration’s AI czar overseeing AI policy, ran an online campaign to block the bill, but instead helped boost its chances of passage. Last week on X (formerly Twitter), Sacks shared a post claiming that Trump’s opponents and advisers to former presidents Barack Obama and Joe Biden devised the bill to weaken Trump’s “America First” strategy, writing, “Accurate.” China’s response has been muted. Although the US opened a path for exports of Nvidia’s H200 chips, the Chinese government has moved to “test wills” with the US, including notifying some companies that purchases of H200 chips would be limited to special cases. Reporter Han Kyung-economy hankyung@hankyung.com

KOSPI makes new history for the first time in 46 years…experts’ outlook "Korea premium— even 5,000 is cheap" vs. "up 1,000 points in three months—overheated" Profit outlook improving for semiconductors, autos and defense PER of 10x signals undervaluation…Japan 16x, China 13x Potential tailwinds from MSCI inclusion and a third Commercial Act revision Trump tariffs and geopolitical risks still linger Build up cash to brace for a correction Buy blue chips in tranches on every dip As the KOSPI index broke above the “dream level” of 5,000, attention is turning to how long the bull market can last. Many experts point to rising profit estimates for semiconductors—highly influential on the market—along with autos and defense, and expect the market to maintain a strong trend for some time. Even after the KOSPI’s surge, "it’s still cheap" According to the Korea Exchange on the 22nd, the KOSPI has risen 17.52% so far this year—the highest gain among major equity markets. After setting a record with a 75.6% sprint last year, it is pressing the accelerator again this year. It far outpaces the performance of major indices across 30 countries, including Taiwan’s TAIEX (9.65%), Japan’s Nikkei 225 (6.68%) and the U.S. S&P 500 (0.44%). Experts say it is hard to view 5,000 as overvalued, given that expectations for a rapid increase in listed companies’ earnings per share (EPS) are driving the rally. The KOSPI’s 12-month forward price-to-earnings ratio (PER) currently stands at around 10.65x. That is lower than the U.S. (22.19x), Europe (16.37x) and Japan (16.31x), and even below China (13.67x), indicating undervaluation. The price-to-book ratio (PBR) is also just 1.41x, meaning it trades cheaper than Japan (1.60x) and China (1.80x). Baek Young-chan, head of the research center at SangSangIn Securities, said, “This year’s peak forecast for operating profit in the main board market is as high as KRW 600 trillion—double the previous estimate,” adding, “Even if the momentum in semiconductor bellwethers such as Samsung Electronics and SK hynix slows, growth engines in future industries such as physical AI will lift the index.” Among the top 10 companies by market capitalization in Korea are semiconductors—seen as a future industry—along with robotics (Hyundai Motor), secondary batteries (LG Energy Solution), biotech (Samsung Biologics), defense (Hanwha Aerospace), and nuclear power (Doosan Enerbility). Many view them as more attractive than the U.S., which is tech-heavy, and China, which is tilted toward traditional industries. Over the medium to long term, there are also forecasts that the index could gain additional upside momentum if inclusion in the MSCI Developed Markets Index and a third revision to the Commercial Act become reality. Lee Chae-won, chairman of Life Asset Management, said, “If corporate results come in as expected and reforms such as changes to the inheritance tax system are implemented, Korea’s stock market could command valuations comparable to Europe and Japan.” She also expected previously neglected sectors such as secondary batteries to ride a rotation-driven market. Baek added, “After robotics, companies linked to autonomous driving could emerge, leaving room for further gains in secondary-battery-related stocks,” saying, “Tailwinds outweigh headwinds.” Major brokerages have been steadily raising their KOSPI targets. Korea Investment & Securities (5,650) and Hana Securities (5,600), Samsung Securities (5,400), SK Securities (5,250), and Kiwoom Securities and Yuanta Securities (5,200) have successively lifted their KOSPI index ranges. "Build up cash to brace for a correction" Even as expectations for a bull market rise, some are cautiously urging prudence. After an unprecedented short-term surge, the risk of a deep correction has increased. Geopolitical risks surrounding Venezuela and Iran earlier this year, along with the recent U.S. push to annex Greenland, are cited as factors that could amplify volatility in financial markets. Some also predict that the KOSPI will follow a front-loaded pattern this year. Lee Jin-woo, head of the research center at Meritz Securities, said, “After the KOSPI overshoots in the first half, it could start to pause and consolidate in the second half,” adding, “From an investment perspective, it is positive to build up cash and buy quality stocks in tranches when the index declines.” By Jo Ara / Ryu Eun-hyeok, reporters rrang123@hankyung.com

Impact of AI semiconductors Global tin prices have been climbing sharply since the start of the year, surpassing the $50,000-per-tonne threshold for the first time on record. The move reflects a confluence of surging demand for artificial intelligence (AI) semiconductors and supply disruptions in key producing countries Indonesia and Myanmar. According to the London Metal Exchange (LME) on the 22nd, the spot tin price as of the 21st stood at $52,150 per tonne. That marks a 9.8% jump from just two days earlier on the 19th ($47,475). Compared with the end of last year ($40,900), the price has surged about 27.5% in less than a month. The rise is even more pronounced versus June last year, when prices fell to the low-$30,000 range. Tin has gained more than 60% over six months, extending its sharp rally. The key driver behind the spike is demand for “AI semiconductors.” Tin is a critical input for solder used to connect semiconductor substrates. As AI data centers expand and production of high-performance chips increases, tin demand is surging to record levels. Supply, however, remains tightly constrained. Indonesia, the world’s second-largest producer, has strengthened its crackdown on illegal mines, shutting down about 1,000 operations, while delays in renewing export permits (RKAB) have effectively choked off supply. At the same time, the prolonged suspension of mining operations in Myanmar, the world’s third-largest producer, has exacerbated the supply-demand imbalance. Market experts expect tin’s uptrend to persist for the time being. Major institutions including the International Tin Association (ITA) say the supply issues in Myanmar and Indonesia are unlikely to be fully resolved in the first half. An industry source said, “Supply is limited, while demand from new industries such as semiconductors and electric vehicles is structurally resilient,” adding, “With shortages likely to persist throughout 2026, there is a strong chance prices could rise further this year to $55,000–$60,000 per tonne.” By Sang Sang-hoon uphoon@hankyung.com

Brokerage research heads weigh in on the long-awaited KOSPI 5,000 era “Semiconductor bellwethers’ fundamentals remain solid…ample room for further gains” The era of “KOSPI 5,000” has arrived. After staging a record rally last year on the back of strong semiconductor stocks, the KOSPI reached the long-coveted 5,000 level in the first month of the Byeongo Year, powered by a sharp surge in Hyundai Motor Group shares in the new year. The milestone came as the index extended a streak of gains on every trading day this year except one. On the 22nd, market participants in Yeouido said a consolidation phase could emerge after the sharp short-term run-up, but judged that there is ample upside left for the KOSPI given the fundamentals of leadership sectors such as semiconductors. The KOSPI charges ahead…semiconductors push, Hyundai Motor pulls The KOSPI broke through 5,000 for the first time shortly after the market opened. As of 11:09 a.m., the KOSPI was up 92.37 points (1.88%) from the previous session at 5,002.30. After opening up 1.57%, the index widened its gains to the 2% range within about two minutes of the open to clear 5,000, then climbed as high as 5,019.54 to set a fresh intraday peak. Investor sentiment is seen improving after U.S. President Donald Trump rolled back tariffs he had said he would impose on eight European countries overnight. U.S. equities also managed to rebound on the news. The Dow rose 1.21%, while the Standard & Poor’s (S&P) 500 and the Nasdaq Composite gained 1.16% and 1.18%, respectively. Semiconductor heavyweights Samsung Electronics and SK Hynix are rising in tandem. In particular, market leader Samsung Electronics climbed as high as 160,000 won intraday, achieving “Samsung at 160,000 won.” Hyundai Motor, which has joined the rally belatedly, extended gains for a second day and sprinted to as high as 595,000 won intraday, eyeing a move above 600,000 won. Through Jan. 21, the KOSPI posted gains on every trading day this year except one. Over that period, it rose 16.51%. The steep climb has exceeded expectations in Yeouido, with the index appearing to blow past January KOSPI forecasts issued by brokerages just days ago. Yuanta Securities set the upper end of its January KOSPI outlook at 4,350 on Dec. 31, and Korea Investment & Securities put its top-end estimate at 4,450 in early January, but the index has surpassed both. Brokerages have also been raising their full-year KOSPI targets in succession. Kiwoom Securities revised its early-year KOSPI forecast range to 3,900–5,200, lifting the upper bound from 4,500. Yuanta Securities likewise adjusted its range from 3,800–4,600 to 4,200–5,200. The top end of the consensus forecast (average of brokerage estimates) for this year’s KOSPI, compiled by FnGuide, stands at 4,965. “The KOSPI isn’t overheated…ample room for further gains” Brokerages are betting on further upside for the KOSPI after it entered the uncharted territory of 5,000. While a consolidation phase may appear following the sharp early-year surge, analysts say there is still room to rise when viewed against corporate fundamentals. Park Hee-chan, head of research at Mirae Asset Securities, said, “Strength in the semiconductor Big Two (Samsung Electronics and SK Hynix) and Hyundai Motor Group led the index higher and ultimately to KOSPI 5,000,” adding, “I don’t think prices in key sectors such as semiconductors are excessively pricing in earnings,” pushing back against calls that the market is overheating. Park expects leadership names—such as semiconductors and Hyundai Motor Group shares—to continue to drive the market for the time being. “Stocks in sectors with very solid earnings led by semiconductors, and in sectors whose technological capabilities are beginning to draw global attention, are rising sharply,” he said. “Because their driving force is likely to remain strong, I advise existing holders to maintain a longer-term stance rather than selling hastily.” Lee Seung-hoon, head of research at IBK Securities, also said, “Earnings forecasts are being revised upward mainly for semiconductors, so upside potential remains,” adding, “Based on listed companies’ earnings alone, valuations (share-price levels relative to earnings) are not at an uncomfortable zone. Depending on what Samsung Electronics and SK Hynix say in their earnings releases, the market could rise further.” Lee added, “With DRAM and NAND prices continuing to rise, the environment is in place to lift earnings estimates for semiconductor stocks. Those upward revisions will be reflected in the market,” and said, “Global headwinds also appear to be easing, so the KOSPI’s uptrend is unlikely to be sharply derailed.” There was also analysis that the still-elevated won–dollar exchange rate would not become a major obstacle to further gains, because market fundamentals remain firm. Lee said, “If the won–dollar exchange rate stays around current levels, it won’t hold back the KOSPI,” adding, “Unless it spikes in the short term, the impact on the market is likely to be limited.” He continued, “This is because the market is rising based on earnings rather than a specific momentum factor. There are no major concerns about Korea’s fundamentals.” Still, the possibility of profit-taking after the sharp short-term surge is a burden. Over the past year (Jan. 21, 2025–Jan. 21, 2026), the KOSPI has jumped 94.83%. Lee said, “As the index has risen rapidly, the desire to lock in profits has strengthened,” adding, “A short-term pullback is possible.” In addition, the still-elevated level of U.S. long-term Treasury yields of 10 years and longer is cited as a risk factor. On Jan. 21 (local time), the U.S. 10-year Treasury yield fell 0.05% from the previous session to 4.251% per annum. It recently surged as high as 4.29% amid the Greenland situation, the highest level since September last year. Kim Hak-kyun, head of research at Shinyoung Securities, said, “While the U.S. 10-year long-term Treasury yield fell slightly after President Donald Trump decided to withdraw his ‘Greenland tariffs’ plan for Europe, the level remains high,” adding, “Over the past decade, there have been many cases where global equity market corrections were triggered by rising U.S. long-term yields, so this needs close monitoring.” Shin Min-kyung / Ko Jeong-sam / Jin Young-gi, Hankyung.com reporters radio@hankyung.com

Samsung Electronics renews intraday record high Samsung Electronics and SK hynix are rising in tandem. The move is seen as driven by a surge in the Philadelphia Semiconductor Index on U.S. markets after the impact of scrapping the “Greenland tariffs.” As of 9:11 a.m. on the 22nd, Samsung Electronics was trading at W155,700, up W6,200 (4.15%) from the previous day. SK hynix, which at one point regained the W770,000 level, has pared gains slightly and is up 3.78% at W768,000. Samsung climbed as high as W157,000 intraday, resetting its record high once again. Investor sentiment appears to have improved as concerns over a potential trade dispute surrounding Greenland, a Danish territory, eased. On the 21st (local time), U.S. President Donald Trump wrote on Truth Social: “Following a very productive meeting with NATO Secretary General Mark Rutte, we have laid out a framework for a future agreement on Greenland and the entire Arctic region,” adding, “We will not impose tariffs on eight European countries that had been set to take effect on February 1.” On the news, the Philadelphia Semiconductor Index jumped 3.18% from the previous session. Nvidia rose 2.95%, while ASML and Lam Research also posted gains in the 2% range. Micron climbed another 6.61%, settling into a market capitalization in the US$400 billion range. AMD also surged 7.71% to push past the US$400 billion market-cap mark. Intel jumped 11.72%, as analysis pointed to a shortage of central processing units (CPUs). Reporter Young-gi Jin, hankyung.com young71@hankyung.com

The KOSPI index has broken above the 5,000 mark. According to the Korea Exchange on the 22nd, the KOSPI was up 1.87% at 5,001.97 as of around 9:01 a.m. It hit the long-awaited 5,000 level shortly after the open. Samsung Electronics and SK hynix, bellwethers of the local market, were up more than 3%. Other top market-cap stocks were also broadly higher, including Hyundai Motor (5.83%), LG Energy Solution (0.83%), Kia (1.5%) and Doosan Enerbility (2.74%). At the same time, the Kosdaq index was also surging 1.37% to 964.31. By Jo Ara rrang123@hankyung.com

Annual growth barely holds at 1.0% Construction posts ‘worst report card’ since the FX crisis The economy contracted sharply in the fourth quarter of last year. Facility investment and construction investment retreated significantly, and exports also fell. It is the first time in 22 years that the growth contributions of domestic demand and net exports have both turned negative. The Q4 contraction left last year’s growth rate barely clinging to 1.0%. According to the Bank of Korea’s release on the 22nd, “2025 Q4 (fourth quarter) and annual real gross domestic product (advance estimate),” the economy contracted 0.3% quarter-on-quarter in Q4 of last year. After posting -0.2% in Q1 last year, the economy returned to contraction after three quarters. This is the lowest reading since -0.4% recorded in Q4 2022. By expenditure category, private consumption rose 0.3%, plunging from 1.3% the previous quarter. Goods consumption, including passenger cars, is understood to have declined. Government consumption also saw its growth pace slow to 0.6% from 1.3%. Both items were at their lowest levels since Q1 last year, when they posted contraction. Investment fell steeply. Construction investment dropped 3.9% as both building and civil engineering works declined. While it had shown a 0.6% increase the previous quarter, it immediately turned negative. Facility investment decreased 1.8%, led by transportation equipment such as automobiles. Exports fell 2.1%, driven by automobiles and machinery and equipment, while imports declined 1.7% as items such as natural gas and automobiles fell. In terms of growth contributions, the private and public sectors, as well as domestic demand and net exports, were all negative. Classified by economic agent, the private sector contributed -0.2%p and the government -0.1%p, both contributing to the contraction. By component, domestic demand contributed -0.1%p and net exports -0.2%p, also jointly negative. It is the first time in 22 years that both domestic demand and net exports have posted negative contributions, since Q1 2003 (each -0.3%p). With the sharp Q4 contraction, the annual growth rate also only managed to hold at 1.0%. It was halved in a year from 2.0% in 2024. This is the lowest level since 2020 (-0.7%), when growth deteriorated sharply due to COVID-19. As recently as Q3 last year, when growth surprised at 1.3%, some analysis suggested that “1.1% is possible as long as Q4 does not contract,” but expectations were dashed by the Q4 downturn. There is also the possibility that even the 1.0% growth rate was not fully achieved. Given that the Bank of Korea’s stated range for achieving 1.0% annual growth assumed a Q4 growth rate between -0.4 and -0.1%, some analyses suggest that, when considering the second decimal place, the growth rate could end up in the 0.9% range. The deterioration in construction investment stood out even in the annual figures. Construction investment fell 9.9% last year, the weakest since 1998 (-13.2%), when the International Monetary Fund (IMF) foreign exchange crisis hit. The construction industry also posted -9.6% last year, receiving its worst report card in 27 years. Reporter Kang Jin-kyu josep@hankyung.com

The so-called ‘Maple–Yuan Deal’ between Canada and China is shaking the global economy. That is because one of the United States’ closest allies—and a member of the G7 (Group of Seven)—has moved to deepen cooperation with China, which remains in conflict with the West. Some analysts say it could even threaten the viability of the United States–Mexico–Canada Agreement (USMCA) and become a catalyst that reshapes the direction of the global economy. China and Canada’s leaders meet again just two months later According to Reuters on the 22nd, Chinese President Xi Jinping and Canadian Prime Minister Mark Carney held a summit on the 16th in Beijing. Meeting again just over two months after talks on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju last October, the two leaders put a long chill behind them, declared a “new strategic partnership,” and agreed on a range of trade policies. The deal is seen as a product of meticulously calculated “pragmatism” and “survival.” Critics note that Canada’s economy has been isolated in recent years amid high interest rates, low growth, and intense U.S. protectionist pressure driven by “America First.” Statistics Canada said that in 2023, the share of Canada’s exports to the U.S. reached 77.1% of the total. Such a distorted overreliance was a structural risk that could leave the entire economy wobbling depending on the disposition of the U.S. administration. Immediately after the summit, Prime Minister Carney stressed, “In a somewhat fractured and uncertain world, Canada must build a stronger, more independent, and more resilient economy.” Analysts interpret this as, in effect, a signal that Canada intends to step out from America’s shadow and pursue its own strategy as a “middle power.” From China’s perspective, the deal was also seen as urgent. To open a lifeline for an economy blocked by weak domestic demand, a property crisis, and Western technology curbs, China targeted resource-rich Canada as both a detour around the U.S. market and a strategic entry point. With interests aligning, the agreement is said to contain sweeping and unconventional provisions spanning electric vehicles, agriculture, finance, and energy. At its core, the deal has Canada partially unbolt its auto market in exchange for securing export channels for agricultural products. Rather than merely lowering tariffs, the two sides are viewed as having designed a sophisticated model of shared gains that addresses each other’s key pain points. The most far-reaching element is the opening of the EV market. The Canadian government has decided to effectively eliminate the 100% punitive additional tariff it imposed on Chinese EVs in 2024 in step with the U.S. Under the agreement, Canada will apply a 6.1% most-favored-nation (MFN) tariff rate to up to 49,000 Chinese-made EVs annually. The Canadian government seeks to downplay the significance, noting that this volume amounts to less than 3% of Canada’s annual new-vehicle market (about 1.8 million units). But a closer look at the fine print suggests greater disruptive potential. The agreement stipulates that “by 2030, more than 50% of this quota will be allocated to low-priced EVs with a vehicle price of 35,000 Canadian dollars or less.” A win for Tesla? This is interpreted as handing the “entry-level” EV segment—currently a gap in the North American market—directly to Chinese makers. If ultra-low-priced models such as BYD’s ‘Seagull’ enter under the low 6.1% tariff, they could dominate the market on price competitiveness alone. The Canadian government said it would “offer affordable green vehicle options for working-class consumers and create jobs through joint ventures with China within the next three years.” China, for its part, addressed a long-standing demand of Canadian farmers in the West. China agreed to cut the combined tariff on Canadian canola seed from about 84% to around 15% starting March 1. This implies improved conditions for the canola export market worth about 4 billion Canadian dollars a year (about 390 billion won). Analysts see it as Prime Minister Carney’s gambit to soothe Canada’s agricultural heartland, which had faced a potential collapse due to Chinese retaliation after the Meng Wanzhou affair in 2019. In addition, additional tariffs on about $2.6 billion worth of agricultural and seafood products, including lobster and peas, will be exempted through the end of this year. Reactions at home are mixed. Canada’s agriculture and mining industries welcome the deal, while the auto and parts sectors fear a “supply-chain breakdown.” The industry is watching Tesla. Some analyses suggest the biggest beneficiary of the loosened EV quota may not be Chinese brands but Tesla. Tesla is likely to use the quota to route exports to Canada of Model Y and Model 3 vehicles produced at its Shanghai Gigafactory. In fact, Tesla previously test-exported Shanghai-made Model Y vehicles to Canada in 2023, a move that drove Chinese auto imports through the Port of Vancouver up 460% year on year. With profitability deteriorating amid intensifying competition in China’s domestic market, Canada could become an attractive outlet for Tesla to clear inventory and secure margins. Major foreign media outlets including Reuters analyzed that “the deal will give Tesla an opportunity to resume exports of China-produced vehicles.” By contrast, North America-based auto-parts makers are on alert. If Chinese-made EVs flowing into Canada cross borders through an integrated North American supply chain, tracing parts’ country of origin could become difficult. That could serve as a “back door” that weakens the dense web of U.S. sanctions against China. The two countries also strengthened cooperation in finance and energy. Their central banks extended a 200 billion yuan currency-swap agreement by five years. The People’s Bank of China said it would “expand the use of local currencies and promote trade and investment.” Analysts say Canada, as a G7 country, has lent support to China’s “yuan internationalization” strategy that challenges the dollar’s dominance. The yuan’s share in settlements for Canadian energy exports could also expand going forward. “Economic diversification” vs “a self-inflicted security goal” The deal has drawn sharply divergent reactions, from praise as a “bold declaration of economic independence” to criticism as “a self-inflicted security goal that sold out the alliance.” Supporters argue Canada should enhance consumer welfare in an era of high inflation and diversify export markets to reduce dependence on the U.S. However, U.S. and security experts take a harsh view. The biggest concern is “data security.” As connected-car technology advances, vehicles have become “rolling data centers” rather than mere means of transport. There are fears that software and sensors installed in Chinese EVs could collect Canada’s geographic information, user data, and network information and transmit it to China. The U.S. has been enforcing stringent rules since January last year banning the sale of connected vehicles equipped with Chinese software and hardware. Canada’s decision can be seen as punching a hole in North America’s cybersecurity perimeter. U.S. Transportation Secretary Sean Duffy warned, “Canada’s decision to bring Chinese cars into its market will ultimately be something it bitterly regrets,” adding, “Not a single one of these vehicles will be allowed into the United States.” Two major macroeconomic impacts are cited. First is the risk to the USMCA framework. July 1 marks the sixth anniversary of the USMCA’s entry into force, and the three countries (the U.S., Mexico, and Canada) are scheduled to conduct a “joint review” to decide whether to extend the pact. Under Article 34.7, if any one of the three opposes extension, the agreement moves into an unstable state in which, instead of being extended for 16 years, it must undergo annual reviews. In this review, items such as rules of origin, emerging technologies, and security provisions—where measures to contain China could be strengthened—are expected to be key flashpoints. U.S. hardliners may seize on Canada’s unilateral move to press hard for scrapping the pact or reopening negotiations. If U.S.-bound trade—Canada’s economic lifeline—were shaken, expanding trade with China would be unlikely to make up for the loss. Canada’s pro-China tilt is also changing flows of Asian capital. Signs are emerging of an “exodus” in which Taiwan-linked capital and ethnic Chinese funds, sensitive to geopolitical risk, leave Canada for Singapore or the United States. Taiwan’s top representative in Ottawa recently publicly criticized, saying, “China is not a trustworthy partner.” According to the Monetary Authority of Singapore (MAS), as of 2024 the number of single family offices (SFOs) in Singapore surged to 2,000—indicating that Greater China funds are moving in search of a geopolitically safe haven. Taiwan’s Ministry of Economic Affairs data likewise show that in 2024, the number of Taiwan’s investments in China fell 5.49%, but outward investment rose 90.57%. If Canada leans toward China, a “Canada exit” by Taiwan-linked capital driven by security anxiety could accelerate. Financial markets also reacted immediately. On the day the agreement was announced, the 16th, the Canadian dollar fell 0.2% against the U.S. dollar to 1 USD = 1.3928 CAD, slumping to its lowest level in six weeks. Shaun Osborne, chief FX strategist at Scotiabank, said, “Market concerns that the U.S. will not welcome this agreement were reflected in the exchange rate.” Korean companies will also be affected by the ‘Maple–Yuan’ agreement. Korean automakers and battery manufacturers may face “double pressure” from intensified price competition in the Canadian market and higher barriers to entering the U.S. market. The U.S. may also tighten USMCA rules of origin to pressure Canada. The U.S. is already banning the use of Chinese minerals and parts through the Inflation Reduction Act (IRA) foreign entity of concern (FEOC) rules. If the July USMCA renegotiation strengthens “origin verification” or adds “poison pill” clauses that strip duty-free benefits from batteries containing even a small amount of Chinese materials, the strategies of Korean companies building battery plants in Canada will inevitably require a wholesale overhaul. By Kim Joo-wan, kjwan@hankyung.com

◆ Trump: 'Greenland is our territory… we want immediate talks and won’t use force' U.S. President Donald Trump on Jan. 21 (local time), in a speech delivered in the heart of Europe, reaffirmed his determination to make Greenland—an autonomous territory of Denmark—part of U.S. territory, declaring that he hopes for “immediate negotiations” and that he will not use force. In a roughly 1 hour and 20 minute address at the World Economic Forum (WEF) annual meeting in Davos, Switzerland—also known as the Davos Forum—Trump devoted substantial time to arguing the legitimacy of his ambition to acquire Greenland. He first stressed that “no country other than the United States is in a position to keep Greenland safe.” Before leaders and economic figures from major European countries, he again laid bare his desire to annex Greenland, saying the island, rich in rare-earth deposits, is a “strategic chokepoint” wedged between adversaries China and Russia, and “part of the North American continent and our territory at the northernmost edge of the Western Hemisphere.” He added, however, “I do not want to use force, and I will not,” ruling out the option of employing military power to secure Greenland. ◆ Wall Street rises as Trump rolls back ‘Greenland tariffs’… Dow +1.2% U.S. stocks rose across the board on Jan. 21 (local time) after President Donald Trump withdrew his threat of so-called “Greenland tariffs” that had been slated for eight European countries. The Dow Jones Industrial Average closed up 588.64 points (1.21%) at 49,077.23. The S&P 500 gained 78.76 points (1.16%) to 6,875.62, while the tech-heavy Nasdaq Composite rose 270.50 points (1.18%) to finish at 23,224.82. The key catalyst behind the rebound was upbeat news out of the World Economic Forum (WEF) in Davos, Switzerland. Trump said on social media that he had met NATO Secretary General Mark Rutte and agreed to build a future cooperation framework covering Greenland and the broader Arctic region. He also announced he would scrap, effective immediately, plans to impose steep tariffs on European countries starting next month. By sector, semiconductors and megacap tech led the recovery. ◆ AI Framework Act becomes the world’s first to take full effect… industry watches implementation standards The Framework Act on the Development of Artificial Intelligence and the Establishment of a Trustworthy Foundation (AI Framework Act) took effect starting Jan. 22. It is the world’s first comprehensive law of its kind, rather than a partial set of AI-related regulations. The law focuses on supporting the AI industry to promote the sound use of AI while preventing the use of high-risk AI expected to cause harm. On the promotion side, it requires the minister of science and ICT to establish and implement an AI master plan every three years to foster AI and related industries and strengthen national competitiveness. The National Artificial Intelligence Strategy Committee will be elevated to a statutory committee. It also calls on the central and local governments to respect the creative spirit of AI businesses and support R&D for related products and services. On the regulatory side, the government must refine systems to minimize potential risks AI poses to people’s lives and ensure safe use. It must also support technology development, education and public outreach to secure AI safety and reliability. ◆ Trump rolls back ‘Greenland tariffs’… 'A framework for Greenland-related agreements formed' U.S. President Donald Trump on Jan. 21 (local time) said he had “decided not to impose” tariffs that were set to take effect on Feb. 1 against eight European countries opposing the U.S. annexation of Greenland. While attending the World Economic Forum (WEF) annual meeting in Davos, Switzerland—also known as the Davos Forum—Trump wrote on his social media platform Truth Social that, “Based on a very productive meeting with NATO Secretary General Mark Rutte, we have created a framework for future agreements regarding Greenland and, in effect, the entire Arctic region.” Previously, on Jan. 17, Trump said he would levy U.S. tariffs of 10% from Feb. 1 and 25% from June 1 on eight countries—Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland—that had dispatched troops to Greenland. At the time, the countries sent troops after Trump raised the possibility of military action to annex Greenland, and as Trump played the tariff card, tensions had intensified in a “tit-for-tat confrontation” between the U.S. and its NATO allies. ◆ Wildfire in Gijang-gun, Busan continues overnight… 13 helicopters to be deployed after sunrise A wildfire that broke out the previous day in Gijang-gun, Busan, is continuing despite overnight firefighting efforts. As of 4:30 a.m. on Jan. 22, the containment rate stood at 65%, according to the Busan Fire Headquarters and the National Fire Agency. Of a 1.7 km fire line, 1.1 km has been contained, and the total affected area is 11 ha. Fire authorities issued a Level 2 response the previous day, and the Korea Forest Service also issued a Level 1 wildfire response as of 4:30 a.m. Roads near the scene, including the Yeonhwa Tunnel route, were fully closed, and an evacuation advisory was issued to about 30 staff and guests at a resort. About 340 personnel—including firefighters, the Korea Forest Service, police and Gijang-gun office officials—were deployed to establish firebreak lines and fight through the night to prevent the blaze from spreading. No injuries have been reported. Authorities plan to deploy 13 helicopters after sunrise, from around 7:30 a.m., for intensive firefighting. ◆ Trump: 'Putin to join Gaza peace panel… a doer despite controversy' U.S. President Donald Trump on Jan. 21 (local time) said Russian President Vladimir Putin has agreed to participate in the “Board of Peace,” the top decision-making body for a ceasefire in Gaza and for transitional governance and reconstruction, which Trump chairs. Reuters and CNN reported that Trump made the remarks after meeting NATO Secretary General Mark Rutte on the sidelines of the World Economic Forum (WEF) annual meeting—also known as the Davos Forum—in Davos, Switzerland. Asked why he invited Putin to the panel, Trump replied, “Because we want everybody. We want all countries whose people control them and have power (to participate). That way, problems don’t arise.” He added, “There are some controversial people, but these are people who get things done.” Trump continued, “So I invited President Putin, and he accepted.” ◆ Bitter cold persists… snow and rain mainly in Jeolla and Jeju On Thursday, Jan. 22, severe cold will continue nationwide. Morning temperatures in most regions will hover around -10°C, and strong winds will push wind chills even lower. The Korea Meteorological Administration forecast morning lows of -19°C to -5°C and daytime highs of -8°C to 3°C. Skies will be mostly clear nationwide, but Chungcheong, Jeolla and Jeju will be mostly cloudy. Snow or rain is expected mainly in Jeolla and Jeju. Forecast snowfall: Ulleungdo and Dokdo 5–15 cm; the west coast of Jeolla and Jeju’s mountain areas 2–7 cm; Jeju mid-mountain areas 1–5 cm; Gwangju and inland central Jeonnam and the western south coast 1–3 cm; Jeju coastal areas around 1 cm. Forecast precipitation: Ulleungdo and Dokdo 5–15 mm; Jeju around 5 mm; the west coast of Jeolla under 5 mm; Gwangju and inland central Jeonnam and the western south coast around 1 mm. Fine dust levels are expected to be “good” across all regions due to smooth atmospheric dispersion. Eunji Cha, Hankyung.com reporter chachacha@hankyung.com

Stocks slide, bond prices rise, prompting tariff withdrawal U.S. President Donald Trump said on Jan. 21 (local time) that he had "decided not to impose" tariffs that were set to take effect on Feb. 1 against eight European countries, sending equities sharply higher. Attending the World Economic Forum (WEF) Annual Meeting—better known as the Davos Forum—in Davos, Switzerland, Trump posted on his social media platform Truth Social that, "based on a very productive meeting with NATO Secretary General Mark Rutte, we have created a framework for a future agreement regarding Greenland and virtually the entire Arctic region," announcing the tariff rollback. Trump added that "if this solution is realized, it will be very beneficial to the United States and all NATO member countries." He also said that "additional discussions are under way" on the Golden Dome (the U.S. next-generation aerial missile defense system) to be applied to Greenland, adding that "more information will be provided as discussions progress." In his Davos Forum speech that day, Trump reiterated his claim that the United States should have ownership of Greenland, while saying he would not use military force to achieve it. Earlier, on Jan. 17, Trump said he would impose U.S. tariffs on eight countries—Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland—that had deployed troops to Greenland, at 10% from Feb. 1 and 25% from June 1. Markets weakened on Jan. 19–20 as Trump stepped up pressure on Europe, but stocks rebounded strongly after news of the tariff withdrawal. The S&P 500 was trading around 6,885 as of 3:30 p.m., up 1.3% from the previous session. It briefly jumped to around 6,915 before paring gains. Small caps posted particularly strong gains. Energy-sector shares also climbed to near record highs. Treasury yields, which have served as a channel for markets to signal warnings about Trump’s aggressive foreign policy, also reacted. The 10-year U.S. Treasury yield fell 4 bp to 4.25%. Bloomberg reported strong demand at an auction of $13 billion in 20-year Treasuries. As U.S. equities and bonds rose, the dollar index (DXY) also gained 0.19%. Cryptocurrency prices also rebounded sharply. Bitcoin rose about 1.7%, while Ether climbed roughly 2.6%. Washington=Lee Sang-eun, correspondent

Japan’s political parties compete on ‘consumption tax cuts’ without funding plans Zeroing the food consumption tax would cut annual revenue by 5 trillion yen Fiscal deterioration fears... ultra-long yields hit record highs On the 20th, yields on Japan’s ultra-long government bonds surged in the Japanese bond market (with prices plunging). The 30-year JGB yield at one point hit 3.88% per year, while the 40-year reached 4.215%, both setting new record highs. It is extremely rare for Japanese government bond yields to rise by more than 0.2% points in a single day. Behind the move is the risk of fiscal expansion. Ahead of the House of Representatives (lower house) election, Prime Minister Sanae Takaichi said on the 19th that she would set the food consumption tax rate to zero for two years, adding that she would “end an excessive tilt toward austerity.” The new party formed by the opposition Constitutional Democratic Party and Komeito, the “Centrist Reform Alliance,” also included “zero consumption tax on food” in its basic policy platform. With both ruling and opposition parties putting consumption tax cuts at the center of their pledges, concerns are growing that fiscal discipline will unravel. The Nikkei said that “tax-cut policies without sufficient funding measures are populist,” adding that “the bond market moves on the 20th show that the market’s concerns about tax-cut policies have risen to an extreme level.” Among the Japanese government bonds it issues, those with long maturities—20-year, 30-year and 40-year—are called ultra-long bonds. Issuance amounts are 800 billion yen a month for the 20-year and 700 billion yen a month for the 30-year. The 40-year, issued once every two months, is 400 billion yen per auction. Typically, the longer the borrowing period, the higher the interest rate. That is because the longer the lending period, the greater the risk of not being repaid. In Japan’s bond market, while the 10-year yield—an indicator for long-term rates—stands in the 2% range per year, the 40-year has risen above 4%. Bond yields and prices move in opposite directions. Even if market prices change, the amount a JGB buyer can receive from the government at maturity does not change. On the 20th, almost no buyers emerged for 30-year or 40-year bonds in the bond market, and prices plunged, pushing yields higher. The collapse in JGB prices reflects concerns over fiscal discipline. The annual cost of cutting the food consumption tax is about 5 trillion yen. While Prime Minister Takaichi said it would be a temporary, two-year measure, many market participants are increasingly concerned it could gradually lead to permanent tax cuts. The Centrist Reform Alliance also plans to use new government-affiliated funds and other sources as funding, but whether they will provide a stable source of revenue remains unclear. If the government’s funding conditions deteriorate, investors will demand higher yields as compensation for buying government bonds. Inflation worries also contributed to bond selling. If fiscal discipline weakens, the currency’s value may also fall, heightening the risk of prolonged yen weakness and inflation. Fiscal expansion in the form of consumption tax cuts could stoke inflation. Bond investments are more vulnerable than equities and other assets to inflation that erodes the currency’s value. Tokyo = Correspondent Kim Il-gyu black0419@hankyung.com

Amazon CEO first acknowledges tariff impact Findings also show “96% of tariffs absorbed in the U.S.” An assessment has emerged that U.S. President Donald Trump’s tariff policy is beginning to materially push up consumer prices. The chief executive officer (CEO) of Amazon, the world’s largest e-commerce company, for the first time acknowledged that price increases are appearing in some products due to tariffs. Andy Jassy, Amazon’s CEO, said in an interview with CNBC on the 20th (local time), “We tried to keep prices low after building inventory ahead of the tariffs, but most of that stock was depleted around last fall.” He added, “Tariffs have been reflected in the prices of some items, and some sellers have decided to pass the higher costs on to consumers,” noting that “we’re starting to see more of that impact.” CNBC said Jassy’s remarks mark a noticeable change from last year. As recently as June last year, he said of the tariff impact that “prices haven’t risen noticeably.” Separately, research has found that 96% of the tariff costs imposed by the Trump administration were passed through within the United States. Germany’s Kiel Institute for the World Economy said on the 19th that, after analyzing trade data worth $4 trillion (about KRW 600 quadrillion), exporters absorbed only 4% of the tariff costs. However, White House spokesman Kush Desai said in a statement on the 20th, “During the second Trump administration, the average U.S. tariff rate has risen nearly tenfold, but inflation has continued to cool from its peak under the Joe Biden administration.” He stressed, “The administration’s position is firm that foreign exporters seeking access to the U.S. market will bear the tariff costs,” adding, “That is what is actually happening.” Reporter Im Da-yeon allopen@hankyung.com