Exchange rate and stock exchange emergency...What is the impact of martial law and impeachment?

■ Host: Anchor Kim Youngsoo Kim and anchor Lee Eun-sol
■ Starring: Lee In-cheol, Director of the Economic Research Institute,


* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information. Please specify [YTN Newswide] when quoting.

[Anchor]
is a really unstable economic situation as the sudden variables of emergency martial law and impeachment have occurred in our already frozen economy. Recently, the exchange rate has exceeded 1,400 won, stimulating prices again. The economic fallout from the unstable political situation in Korea, today's reference to Lee In-cheol, head of the Economic Research Institute, will be reviewed. Please come in. Let me start by talking about the exchange rate. The exchange rate recently exceeded 1450 won. It's been 15 years since 2009?

[Lee In-cheol]
That's right. It's been over 1450 won for two consecutive days. What we talked about before was that it rose to 1960 won during the IMF financial crisis, so if it was a very emergency at the time, it exceeded 1,400 won during the global financial crisis in 2009. At that time, it went up to 1570 won. It's the third time since then, and as you said, it's the first time in 15 years and 9 months that it's exceeded 1,450 won based on the closing price since March 2009.

Why is the exchange rate so high? The value of the won, the value of the money, is directly related to the economic fundamentals of the country. It's a complex reason why the won's value is falling so much. Internally, the sluggish domestic demand is really prolonged. In addition to slowing exports, political uncertainties such as martial law and impeachment are added. Externally, the G2 and China economy are stagnating, and Trump's second-term protectionist risks are increasing. To make matters worse, the U.S. will cut interest rates and speed up interest rates due to inflation while the U.S. is hawkishly cutting interest rates. In the meantime, the Fed raised its economic growth forecast for next year and its U.S. forecast.

The U.S. economy is 1.2 percent next year. The Bank of Korea may not even be able to do 1.9 in the country next year. It's been two years in a row. The U.S. economy is growing by 2.8% this year. It's February 1st next year. However, Korea's 2.1 to 1.9 this year may fall further behind next year's 1.9, so there is no means to keep the king dollar in check around the world. The same goes for the European Union. The yuan in China and the yen in Japan. That's why the dollar is strengthening by itself.

[Anchor]
This is a situation where an unusual high exchange rate could continue until the sluggish domestic demand and political instability end.
Even if the US stock market has risen recently, it has risen too much. There is even a bubble theory, so what do you think of the US stock market?

[Lee In-cheol]
is correct. How much did the KOSPI fall compared to the beginning of the year? 9. It fell by 5%. KOSDAQ is down 23%. It has the lowest yield than Russia at war. When I saw it at dawn, the Nasdaq is going up, and the Dow is said to be the longest decline since the 1970s for 10 consecutive days, and the Dow is up 13% compared to the beginning of the year. And the Nasdaq is up 30%. In that situation, the Korean stock market is actually Murphy's Law, I want to cry, but I'm getting slapped. Since the stock market rises to an all-time high after sleeping, I expected the stock market to escape the floor, but even this seems to be hampered by political uncertainty. Last week, I actually expected that the impeachment bill would rise a little if it was passed. It only went up one day during the week last week. Four days out of five stock trading days are missing. As a result, the KOSPI is threatened by the 2,400-point level, and the KOSDAQ has now collapsed by the 670-point level, which foreigners will probably remember. Morgan Stanley's Semiconductor Winter Is Coming Since August, it has sold a whopping 22 trillion won. I sold it again. We sold nearly 4 trillion won for two weeks after martial law. As a result, the salary itself collapsed. Even individuals are leaving the bureau. In particular, last week, second-tier owners plunged as Trump's transition team abolished the IRA and inflation reduction laws and said it would impose tariffs on battery materials. On top of that, Micron, a semiconductor stock wind meter, had a good quarterly performance, but the future outlook was unclear. As a result, semiconductor stocks have even warned of poor performance. So what are the foreign media expressing? The Korean stock market is on sale at ultra-low prices. That's why sometimes foreign investors buy it a day or two as they go out to pick it up.

[Anchor]
Foreigners are not the same.

[Lee In-cheol]
is correct. Because it's worth buying for those who invest in value. The PBR of the Korean stock market, KOSPI, fell to 0.8 times, which is a record that has never been recorded before. So, two stocks on the KOSPI and KOSDAQ are at a new low price. That's how affordable it is.

[Anchor]
I see. By the way, investors like Warren Buffett in the U.S. say that the U.S. market is too overvalued. That's why I have more cash than stocks. But recently, right after the Fed announced a rate cut, the Nasdaq plunged 3.5%. Of course, it rebounded by 1%.E. U.S. stock market bubble theory, is it okay to invest in the U.S. stock market?

[Lee In-cheol]
First of all, what do you eat in the stock market? I live off my performance and competition. But if I say that the performance will continue to be good, I'll buy stocks with good future performance in the future. They say the economy will be good, too. They like next year, too. Prices were somewhat unstable, so it ended with a hawkish cut. As a result, it is true that the outlook for the U.S. stock market is getting higher, and on the one hand, those who really invest in value are too highly valued. Of course, we have not been able to reform the structure for about 30 to 40 years, so semiconductor and shipbuilding industries continue to lead, but the stock price continues to rise as the United States forms a new theme of artificial intelligence called AI. This theme has been very new to Nvidia for two to three years now. Suddenly, there was a Michelin 3 restaurant.

Until now, Intel and Samsung Electronics have been famous for semiconductors. What kind of house this place was, I was used to mass-producing and printing small items. But in the meantime, Samsung Electronics said, "What is this AI? If you give each customer a blueprint, please make 10 accordingly. We do. We produce a lot of varieties in small quantities. In the meantime, we've stayed away because it takes a lot of work and is not profitable. That's what changes the world. With open AI, ChatGPT being born now. But who is leading the market, Nvidia is leading the way. It's overwhelmingly No. 1 with 8:2. The price of one chip here, this one called HBM, is around 60 million won.

This has an operating profit ratio of 60-70%. Since the operating profit of 60 to 70 million won is 70 to 80%, all IT companies around the world are lining up. But because there are so many profits, they are looking for an independent opponent to check this.
What appeared this time is a company called Broadcom. Broadcom is a manufacturer of chips for telecommunications and is a fabless company. What is fabless? It's just a design. It doesn't get oily. Everything is outsourced, but the operating profit ratio is 60-70%, so I thought they made only good chips for communication, but when I opened the lid, AI sales tripled last quarter. What did he say, he is jointly developing AI next-generation chips with global IT world companies, which could stay in the production stage in 2026.

The company's stock jumped more than 20% in a single day as it announced a roadmap to make up to 1 million, making it the ninth U.S. company to achieve a global market cap of $1 trillion. So, new companies continue to generate new profitability in the U.S. stock market. But we've only been looking at Samsung Electronics and Hyundai Motor for 30 years. I'm only looking at SK Hynix. As a result, the merit of domestic stocks continues to fall. On the contrary, all the large companies that had lined up are in line with Nvidia, Broadcom, and Apple, so if you ask which company you want to invest in, 10 out of 10 individual investors who invested in domestic stocks will lose money this year. However, 10 out of 10 individual investors who have invested in U.S. stocks are all positive.

[Anchor]
Will the New York Stock Exchange continue to rise in the future?

[Lee In-cheol]
Unfortunately, considering the performance outlook and economic outlook, Korea's growth rate is less than 1.9 next year, even though the economy is about 10 times smaller than the U.S., but the U.S. says it is too good at 1.1%.

[Anchor]
I heard that the value of Korean stocks is undervalued.

[Lee In-cheol]
So, when it comes to investing in value, some companies that are too far away now are worth piling up one after another. However, it is too difficult to divert foreign investment in the short term. Because even if foreigners invest in domestic Samsung Electronics, Hyundai Motor, and SK Hynix, if the exchange rate rises like this, there will be a currency loss. It is not an attractive situation at all because they have to sell and exchange dollars, but rather, the rate of return from stocks can become negative as they exchange. Samsung Electronics' foreign ownership ratio is about 50% right now. There is also a chance that it will fall below this.

[Anchor]
I took a look at the stock market situation. Also, isn't Bitcoin one of the areas that draws attention? The U.S. Fed recently decided to cut interest rates and has fallen sharply since then, is there any chance of further decline?

[Lee In-cheol]
First of all, Bitcoin cannot be analyzed technically. And it's the Trump rally. It was $70,000 when Trump was elected.

[Anchor]
Is it down to 97,000 dollars now?

[Lee In-cheol]
That's right. It's moving around $96,000 right now, and it's $108,000.

[Anchor]
It's down more than 10%.

[Lee In-cheol]
That's right. It's 10% off from the peak. It was 157 million won in Korean won, but now it's 146 million won, and Trump dismissed Gary Gensler, the chairman of the U.S. SCE, who regulated virtual assets very strongly, and voluntarily resigned. In addition, all of the virtual asset SS units are forming the virtual asset SS within the White House.
And when I say I'm going to raise a fund to continue expanding my strategic assets, I mean I'm going to reserve 2 million Bitcoin over 4 to 5 years after Trump is elected and then I'm going to take office. If that becomes a reality, the total amount of this is limited in countries around the world. It is limited to 21 million and about 19 million have been mined, and it takes 2 million lockins. That would be rare. When the supply decreases, the price goes up. That's why I'm going up. Of course, there are voices against it. Powell is actively opposing it. How do you stockpile volatile assets as strategic assets such as gold or dollars? So what's next year's focus? Trump is guaranteed Powell's term until 2026. I'm looking forward to a very strong fight.

[Anchor]
As Powell made his Bitcoin remarks, Bitcoin plunged.

[Lee In-cheol]
First of all, there are pros and cons about strategic reserves, along with hawkish interest rate cuts.

[Anchor]
Did you say you can't use bitcoin as a strategic reserve?

[Lee In-cheol]
I mean, I'm against that. from Powell's point of view So, the position of the financial authorities and the position of the Trump administration are a little different, and the decision is different, so we need to see how much of this is implemented.

[Anchor]
We've even looked at Bitcoin. I looked at the exchange rate earlier and looked at the economic growth rate. But if the exchange rate continues to rise, it stimulates prices. I heard that prices are stabilizing, but I heard they're wriggling a little again.

[Lee In-cheol]
is correct. If the high exchange rate continues, we have a fairly high proportion of import prices. This affects domestic consumer prices with a lag. Before our martial law, the won-dollar exchange rate was 1402 won. Last weekend's closing price jumped more than 3%, in two weeks. It jumped more than 3% in two weeks, with trading days. If the won-dollar exchange rate jumps 1%, it has the effect of raising the consumer inflation rate by 0.02 to 0.03 percentage points over a year. As a result, inflation is sluggish consumption. It can lead to a decrease in investment and lead to a vicious cycle of economic slowdown.

[Anchor]
Now, both KOSPI and KOSDAQ closed lower, but many foreigners and institutional investors have escaped. Can this be seen as the aftermath of martial law and impeachment?

[Lee In-cheol]
I wanted to cry earlier, but the fact that I got slapped is actually not good for our internal economy. Because the Bank of Korea said that. Even before the impeachment, Korea's growth rate next year is 1.9, and 2026 is 1.8. For the second consecutive year, we have grown in the 1% range before we were born. 6. The 25th war, it's the first time in nearly 70 years since 1965. Since 1956. So now, with low growth, political uncertainty is added to this and Trump's second period of stronger protectionism. The past two impeachments have had a hill of ville. In 2004, the Chinese economy was very booming. In the impeachment process in 016, the semiconductor cycle was booming, so the recovery period was very fast by using exports as a driving force. However, next year's Chinese economy is not good enough to raise concerns about deflation. The U.S. economy is good, but with the stronger, stronger second administration, we probably have the largest surplus ever in the Trump administration, especially last year. In that case, the Trump administration is likely to give us a part to resolve this, to resolve it, and to submit a bill.

Considering this, I actually talk about not only the economy, but also the stock market, the exchange rate triple, the perfect storm, and some people say this. Forbes magazine even warns that Korea could enter the beginning of a lost decade like Japan.

[Anchor]
What should I do then, for the economy of our country?

[Lee In-cheol]
Bad news spreads faster. Good news doesn't spread quickly. The world's major headlines, which were decorated by the Han River and BTS, are suddenly being given a very bad news of emergency martial law. So it's the same now. The power of our passports is at the level of free pass. It is possible to pass without a hitch in more than 190 countries. I have a global passport power, but now Thailand doesn't accept Korean money. I can't exchange money in Korea. I have to change this. How long will it take to change this? Probably, the Korea discount phenomenon is intensifying, and Forbes magazine says it will take so long that 51 million Koreans will have to pay it back in installments for a very long time. Nevertheless, former chairman Lee Kun-hee said this. Korean politics is third-rate. I believe this saying that the first-rate people are being fed.

In the past, there was an impeachment and politics was unstable, but the wise people always solved this. The ball went to the Constitutional Court now. It goes for at least two to three months or six months before the Constitutional Court ruling comes out. You have to relieve this. And then internally, the government has been operating very tight for three years, so it's time to spend money. The economy is so bad that we can enter a recession, so we're loosening our finances. Small business owners are very difficult right now. I'm in a situation where I have to provide financial support. As a result, the opposition party is talking about an extra budget early next year, but it is very difficult to require an extra budget. It's a national disaster or a war, but it's a situation equivalent to that now, so we have to quickly release our finances and stimulate the economy with an agreement between the ruling and opposition parties, and so do companies. I can't plan for next year. About half of the large companies now say they will tighten next year. Austerity means reducing investment and reducing manpower. But you have to make this kind of investment to use the crisis as an opportunity. So I'm probably the three economic players. I think the government, businesses, and households should probably cooperate with each other to overcome this crisis.

[Anchor]
You have offered some solutions internally, what do you think externally? It is said that pessimism about Korea is spreading abroad.

[Lee In-cheol]
I told you earlier. I told you that the Korea discount is becoming a reality because there was only good news overseas and suddenly bad news with the impeachment. I'm sure everyone feels the same way. Even in the beginning, in the case of the three credit rating companies, the impact of the Korean economic fundamentals is limited. But two weeks ago, Moody's, a credit rating agency, suddenly lowered France's sovereign credit rating.

[Anchor]
Why did you lower France?

[Lee In-cheol]
There's also political instability there. It's because the political situation and finances are unstable, but we're also in both. We also have both, but France's national credit rating is one level lower than ours. So, even if it's not now, we're paying close attention if this situation gets prolonged. If this political uncertainty is prolonged, foreign investors will naturally have no choice but to sell Korea and warn that it could affect Korea's national credibility.

[Anchor]
I think I have to ask you the last question. Chairman Chung Yong-jin met with President-elect Trump, right?

[Lee In-cheol]
First of all, our government officials and the president should meet first, but it's the first time for domestic and foreign personnel. It is said that he had a meeting with Trump for 10-15 minutes through his relationship with Trump Jr., the eldest son of Trump, and that he had a deep conversation in the 10-15 minutes before he said, "What kind of deep conversation would he have had?" First of all, the meeting is meaningful. And Korea is the eighth country in the trade surplus with the United States. Then at least Trump has income statements and bills enough to call Korea an ATM. What the hell is that inside? We can figure out the bill of what to yield and what we should receive more. Of course, Shinsegae is a domestic company. There is very little direct trade with the United States. Nevertheless, in my mind, I think there are a lot of things left in the U.S. right now, agricultural products, oranges, bananas, rice, and beef.

[Anchor]
Aren't you just getting bills? I personally believe that you have received a bill

[Lee In-cheol]
Of course, I didn't announce it because it was confidential. I didn't announce it, but what goes into it is the most important thing right now, semiconductor law, IRA law, and Samsung are more urgent. Secondary battery companies are even bigger because they said they will get what bills they will get and dispose of the IRA. I'm building dozens of factories in the United States, but I have to take my foot out. So you can play a role in mediating these things. Because it seems that he invited the president-elect on January 20th. In this case, I heard that I was introduced to various people on the spot, so I think I can expect Samsung to play a bridge role and a bridge role that I can introduce.

[Anchor]
I see. Exchange rate, stock market emergency. We also pointed out the repercussions of martial law and impeachment. Lee In-cheol, the reference was with the head of the Economic Research Institute. Thank you very much.