Goldman's Kwon: Bullish on Korea Fundamentals

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00:00take a look though at despite all this what we're seeing on the korean won because that weakness is

00:06still coming through despite that verbal intervention we've been seeing from korean

00:11officials they're perhaps looking to the national pension service in terms of trying to sustain

00:20the rebound on the korean won we are hearing as well on how the bok is set to meet with some of

00:27these lenders tomorrow but the standout amid all this has been this tweet from the treasury secretary

00:36of the u.s he talked about how he met with the south korean deputy prime minister to discuss

00:43critical minerals right he's kind of been meeting with some of these asian officials including i

00:49think his australian counterpart talking about the supply chain talking about materials there but

00:56interestingly also of course how he has uh talked about this issue of the korean won weakness that's

01:02something that he has been sharing in terms of commentary with not just the korean side of things

01:08but also in japan when he spoke to katayama-san so certainly the weakness in these north asia currencies

01:18is drawing attention from u.s officials as well now let's bring in guhun kwan senior asia economist at

01:26goldman sachs guhun of course we are watching out for the bok decision not expected to move we've been

01:32seeing growth pretty firm maybe the bok's focus is gone beyond the stability in the housing market but

01:40what are you watching out for today against the backdrop of this weakness in the currency yeah we

01:48uh we expect the bank of korea to uh to keep the palace rate on hold uh because of uh you know the

01:55concerns about the extreme volatility korean won and also some consideration housing market but when

02:00you look at the fundamentals like gdp growth and the inflation etc i think this fully justify another cut

02:06but for now i think they will on hold what is the center getting on the policy options for

02:16the bok or finance authorities in south korea given the slide we've been seeing in the one

02:24the the driver of the korean won is not like japan where where the rate differential matters a lot but

02:30you know in the case of korea i think 2.5 percent sufficiently high and as we predict if fed continue to

02:36cut at least twice this year then the rate differential will go down to like one percent so

02:41that's very small rate differential the reason why korean we can so much actually since october last year

02:48was because of huge outbound flows from korean details and also sustained outbound flows from

02:55social security fund in korea which is one of the largest in the world so but that can be handled

02:59relatively easily relative to foreign selling stocks but at the end of the day when you look at the cost p

03:05korean equity market and korean one going the other way and this cannot deviate for for too long for

03:11too far yeah in terms of the direction of travel for the one those remarks from the u.s treasury scott

03:18besant did put a floor under things the one actually gained one percent after that but longer term

03:24what do you see needs to happen to stabilize the currency and you know if we do get more easing from

03:29the bank of korea not today but later on this year do you see more weakness ahead well uh the uh we cannot

03:39agree with the uh besant more on his view on korean one as you mentioned at the beginning we we think

03:46that i think we are one of the most bullish house on korean one we expect the korean one go down to below

03:52uh the 1400 on a 12-month horizon uh given the very strong fundamentals and also favorable secret car

04:02tailwind especially on falling oil price and rising cheap prices as well as a very strong korean equity

04:10market