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On June 10, the information got here out that the U.S. shopper costs in Might rose a whopping 8.6% yr on yr, which can possible drive the U.S. Fed to lift the benchmark rate of interest by a big margin this week. Upon the information, the KOSPI plunged 3.5% and KOSDAQ 4.7%, respectively on Monday morning. The inventory markets elsewhere, together with the EU, Japan and China have been additionally hit. If the Fed continues to lift the rate of interest till the yr finish to deal with inflation, a world financial recession appears arduous to keep away from.

The inventory market was closely affected by the U.S. shopper costs as a result of they rose additional, defying the expectations that they might decelerate in Might after hovering over 8% for 2 consecutive months. Nonetheless, the costs jumped larger than anticipated and U.S. gasoline costs breached record-high 5 {dollars} per gallon, whereas U.S. shopper confidence dampened extra apparently as a result of excessive costs. The Monetary Occasions discovered that 70% of the 49 U.S. economists it surveyed forecast that the U.S. financial system might face an financial downturn in 2023. The European Central Financial institution, which has been delaying rate of interest improve to spice up financial restoration, introduced it is going to elevate the speed within the coming month, giving into excessive costs strain.

U.S. financial tightening and excessive inflation apart, the Korean financial system is confronted with a number of headwinds, together with commerce deficit from larger oil and uncooked materials costs, disrupted logistics and manufacturing as a result of cargo truckers’ strike and stoop in semiconductor enterprise, one in every of its signature exports. Consumption is plummeting in China, one in every of Korea’s largest buying and selling companions. Even worse, the neighbor could also be imposed with yet one more lockdown as COVID-19 is resurging.

International investor exodus is accelerating as nicely. They’ve been promoting Korean shares for the final 5 months, and bought greater than 500 billion Korean gained value shares on Monday alone. Provide and demand index for Seoul flats gross sales dropped for the previous 5 weeks consecutively as a result of hovering rates of interest whereas precise housing transaction circumstances dropped to 1 third in comparison with final yr. In the meantime, Bitcoin fell beneath 26,000 {dollars} on Monday. All asset markets akin to shares, actual estates and cryptocurrency appear to be concurrently grinding to a halt.

It’s time to brace for asset bubble burst as post-pandemic cash tightening begins. Some warn that Korea’s asset market is inflated to the extent larger than the tech bubble within the early 2000s. It’s advisable to keep away from any dangerous funding, which rely vastly on luck. The federal government must also provide you with coverage measures envisioned this month that may cut back a lot of the adverse affect on native asset markets. The market might fall right into a tumult if the federal government fails to ship sign that it has full management over the present financial scenario.

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