Capital Economics: Strong Korean Stock Market Unlikely to Boost the Macroeconomy
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Glonghui, February 3rd|Capital Economics stated in a report that the boom in the South Korean stock market is unlikely to boost domestic demand or the overall economy. Economist Gareth Leather pointed out that, in theory, a sharp rise in the stock market can make households feel wealthier through increased asset values, thereby making them more willing to spend, but this effect is very limited in South Korea. Household wealth remains primarily concentrated in real estate rather than financial assets, and housing prices have remained flat overall for many years. Meanwhile, the boost from consumption subsidies is fading, and the short-term consumption outlook remains weak. However, Leather does not believe that this round of stock market gains is entirely meaningless for the economy. “This rebound reflects South Korea’s central position in the global artificial intelligence cycle, indicating strong prospects for export growth, even though domestic demand remains sluggish.”
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