Bank of Korea Governor Signals Continued Easing Cycle Amid Record Market Gains

This analysis is based on the Bloomberg interview [1] with Bank of Korea Governor Rhee Chang Yong, published on November 12, 2025, where he signaled continued monetary easing while dismissing Korean stock overvaluation concerns. The Governor’s comments came as South Korean markets experienced extraordinary performance, with the KOSPI surging 71% year-to-date in 2025, making it the best-performing Asian market since 1999 [3]. The interview provided crucial market reassurance, with the KOSPI rising 1.29% to 4,150.39 points following his remarks [0].

Governor Rhee emphasized that “given the negative output gap, our official position is that we will maintain the easing monetary cycle,” while noting that “the magnitude and timing of the cut or even the change of direction will depend on the new data that we’ll see” [2]. This data-dependent approach reflects the BOK’s balancing act between supporting economic growth and managing emerging risks. The central bank has maintained its base rate at 2.50% since July 2025 after implementing four rate cuts since October 2024 [2][4].

South Korea’s economic fundamentals provide context for this policy stance:

• Inflation rate at 2.1% in September 2025, within manageable levels [4]
• Unemployment at 2.5%, indicating tight labor market conditions [4]
• Exports surging 12.7% year-on-year to a record $65.95 billion in September 2025, with semiconductor exports jumping 22% to $16.6 billion [5]
• The Korean won has weakened against the US dollar, with USD/KRW trading around 1,432, down 4.20% over the past 12 months [4]

The Governor’s dismissal of overvaluation concerns appears supported by comparative analysis. He noted that Korean stocks are “well below the other countries level” and that recent gains led by high-tech and semiconductor sectors reflect strong fundamentals rather than speculative excess [1]. This assessment is particularly relevant given:

1. Sector Concentration
   : The market rally has been heavily concentrated in semiconductor giants Samsung Electronics and SK Hynix, with SK Hynix more than tripling in value in 2025 [3]. SK Hynix reported record Q3 2025 results with ₩24.449 trillion ($17.1 billion) in revenue, up 39% year-over-year, and ₩12.598 trillion ($8.8 billion) in net profit, up 118.9% [6].

2. Comparative Valuations
   : Korean stocks trade at lower multiples compared to global peers, suggesting room for further appreciation [1].

3. Volatility Concerns
   : Despite strong performance, the KOSPI 200 Volatility Index (VKOSPI) has jumped to levels near 40, last seen during market stress periods, indicating elevated investor anxiety [3].

The analysis reveals several critical interconnections:

1. Policy-Market Feedback Loop
   : The BOK’s accommodative stance has contributed to market optimism, while strong market performance supports the case for continued easing through wealth effects and improved business confidence.

2. Semiconductor-Driven Growth
   : The exceptional performance of Korean semiconductor companies has created a virtuous cycle of export growth, corporate earnings improvement, and stock market appreciation, which in turn supports economic growth and justifies accommodative policy.

3. Currency-Market Dynamics
   : The won’s weakness has provided additional support to export-oriented companies while potentially fueling concerns about imported inflation, creating a complex policy environment.

The Governor’s comments highlight South Korea’s evolving economic structure:

1. Technology Sector Dominance
   : The semiconductor sector’s outsized influence on market performance and economic growth underscores South Korea’s successful transformation into a technology-driven economy.

2. Global Integration
   : The sensitivity of Korean markets to global monetary policy and trade dynamics reflects the economy’s high degree of international integration.

3. Policy Flexibility
   : The emphasis on data-dependent decision-making suggests the BOK recognizes the need for adaptability in a rapidly changing global economic environment.

1. Market Concentration Risk
   : The heavy reliance on semiconductor stocks (Samsung and SK Hynix) creates vulnerability to sector-specific downturns. Any slowdown in AI-driven demand or increased competition could trigger significant market corrections.

2. Policy Constraint Risk
   : Despite the easing bias, the BOK’s ability to maintain accommodative policy may be limited by:
   • Rising inflation pressures from strong economic growth
   • Currency weakness potentially fueling imported inflation
   • Financial stability concerns from rapid asset price appreciation

3. External Shock Vulnerability
   : South Korea’s export-oriented economy remains sensitive to:
   • Global trade tensions and protectionist policies
   • China’s economic slowdown
   • US monetary policy changes and dollar strength

1. Continued Monetary Support
   : The data-dependent approach suggests potential for additional easing if economic conditions warrant, providing ongoing market support.

2. Sector Leadership
   : Korean semiconductor companies’ competitive position in AI and high-performance computing could sustain earnings growth and market outperformance.

3. Valuation Gap
   : The relative undervaluation compared to global peers suggests potential for further appreciation as fundamentals remain strong.

Governor Rhee’s interview provides reassurance that the Bank of Korea will maintain a supportive monetary stance while remaining vigilant about emerging risks. The dismissal of overvaluation concerns appears justified by current economic fundamentals, particularly strong export performance and corporate earnings growth in the technology sector. However, the rapid market appreciation and high volatility readings warrant continued monitoring.

The data-dependent policy approach suggests flexibility in implementation, which should help the BOK navigate the complex interplay between supporting economic growth and maintaining financial stability. The concentration of market gains in the semiconductor sector presents both opportunities and risks that require careful management.