South Korea | After a weak Q1, the won should post modest gains
While we expect broad US dollar strength in the rest of 2021, we still see
modest gains in the Korean won (KRW) from current levels. This will come from a real yield advantage over the US, a positive export outlook, and valuations that don’t look stretched.
What you will learn from this report:
- We expect South Korea to retain a positive real yield spread over the US, supported by a higher policy rate than that in the US and a relatively contained inflation outlook.
- The three- and 10-year real yield spreads have remained well
over 1%, despite the rapid rise in US Treasuries over Q1.
- We expect South Korea’s exports to continue growing strongly, lifted by the global trade recovery and semiconductor demand.
US: High debt costs suggest an industrial correction
The scale of the increases in debt costs, coupled with the low-yielding environment makes some repricing highly likely for gateway US industrial markets over the coming quarters.Find Out More
High debt costs suggest European office price correction
Our analysis suggests a 10% correction is needed on average for the major office markets in Europe to compensate for the higher cost of debt, with prime yields required to soften by 10bps-75bps to generate a low-risk interest coverage ratio at a reasonable LTV.Find Out More