Conference Presentation, Panel, Statement
South Korea at the Crossroads | Global Dinner Dialogues 2025
Milken InstituteVincent Park, Roxanne Davies, Joon Oh, Jenni Risku, Michael Wee, Laura Deal Lacey, Byoung Hwan Kim, Robin Hu, Hoon Lee, Timothy Reese, Taewon Yang, Richard Ditizio, John B. Quinn, Samuel Kim, JP Lee, Junghee Oh, Jongku Choi
- Korea aims to establish itself as an adaptable, forward-looking economy with a special 50 trillion KRW financing vehicle at the Korea Development Bank to support high-end technology companies.
- The inclusion of Korean Treasury bonds in the FTSE World Government Bond Index is expected to have a significant long-term impact, particularly on longer-duration bonds, supported by stable fundamental ratings and lower government debt ratios.
- The Korean equity market, currently trading at a 30 to 50 discount compared to developed and developing markets, is poised for a robust recovery in the latter half of 2025 driven by strategic government stimulus and anticipated Bank of Korea easing.
- Significant market momentum and potential rises in long-term interest rates are anticipated once political uncertainty is resolved, coinciding with the planned resumption of short selling effective March 31st and more aggressive fiscal policies including a supplementary budget.
- Korean companies are expected to increase foreign investment inflows if they successfully implement value programs involving divesting non-core assets, shareholder-friendly policies, and labor market flexibility.
- Global investors are expected to allocate more than 50% of capital to global markets, with U.S. market exposure potentially rising from 50% a decade ago to around 60%, and global index exposure reaching 67% or higher.
- U.S. exports are projected to account for 70% or more of the global market in the next five to 10 years, driven by a strong economy and leadership in AI and growth areas, while the "Magnificent Seven" companies may represent about 50% of U.S. market cap.
- Investors are expected to seek medium-risk opportunities in infrastructure and private credits, while retail investors increasingly target high-yield, tax-efficient U.S. and Brazilian bonds, with a dramatic 150% surge in retail foreign bond investment volume in 2024.
- Korean retail client asset management assets are expected to continue a 23% annual growth trend over the past five years, with retail investors now accounting for two-thirds of 2023 transaction amounts and nearly tripling in number since 2018.
- Asian buyout fund exposure to China is expected to have declined to below 5 to 10 percent, while exposure to Korea remains stagnant at 10 to 15 percent, though growth and venture capitalists show strong interest in K-BT, semiconductor equipment, games, and software.
- A "tariff tsunami" is anticipated due to expected reciprocal tariffs from the U.S. administration, including a potential 25% tariff on the auto industry, which may force businesses to consider building plants in the U.S. or forming new alliances.
- The Korean shipbuilding industry is expected to capitalize on the global energy transition with advanced low-carbon fuel engines and solidify its position as a meaningful global player, particularly in LNG vessels, supported by a strategic partnership with the U.S. to diversify away from Chinese dominance.
- Global investors are expected to be highly concerned about the impact of tariffs on Korean industries, while Korean companies may face challenges similar to U.S. or Canadian firms regarding indigenous claims and tax regimes in regions like sub-Saharan Africa.
- Political uncertainty in Korea is expected to persist in the immediate future, though the government is anticipated to address these issues through the rule of law and democratic procedures, with the recent National Pension Fund reform serving as a milestone for social consensus.
- Structural reforms addressing the aging population, labor flexibility, and regulatory challenges are crucial, with the Korean government and financial regulators expected to follow through on promised changes to enhance corporate value and industrial competitiveness.
- Korean companies in the retail sector are expected to grow by building large living and retail complexes in locations like Hanoi and Jakarta, focusing on experiential consumption, while K-beauty, K-food, and K-pop industries are expected to generate significant export revenue.
- The Korean VC ecosystem is expected to produce innovative companies in the AI infrastructure layer, including energy, tech, semiconductors, and actuators, with battery technology firms developing non-flammable vanadium ion batteries potentially surprising the AI cloud and data center sectors.
- AI regulation globally is expected to face slower pace and a lack of strict national standards in the U.S. and Europe, with a patchwork of state and local laws remaining in the U.S., while the European AI Act may not become the default global standard.
- Foreign visitor numbers to Korea are expected to reach pre-COVID levels exceeding 14 to 15 million, and the domestic retail sector is projected to have over 43 million membership participants.
- Capital owners will face challenges in deployment due to geopolitical contestation and economic uncertainty, particularly with the second era of a Trump administration introducing policies focused on "America First" and balance of payments issues.
- Korean companies are expected to adapt by engaging in inbound investment and "buy American" strategies, leveraging private equity and venture capital to improve corporate career efficiencies if specific reforms are implemented.
- The global economy is expected to see a dramatic surge in investment volume in retail foreign bond markets in 2024, with high net worth individuals embracing complex alternative asset classes and retail investors maintaining agility in dynamic equity markets.
- The gap between Korean exports and slack indices suggests significant untapped potential, with the Korean equity market's dividend yield expected to catch up with Asian peers as client deficits waiting to be deployed increase substantially.
- Korea is expected to maintain its position as a key player in the global financial market and value chain, leveraging its net external financial assets which are projected to continue expanding and ranking eighth worldwide.
- Global investors are expected to use U.S. dollar-denominated assets as hedging tools against economic downturns and Korean won depreciation, as translation gains in forex could effectively offset capital losses.
- The outlook notes a divergence where Korea may lag behind India in growth and Japan in cost effectiveness, necessitating specific corporate efficiency measures to attract increased exposure from Asian buyout funds.