November 25, 2024

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From left: Park Chong-hoon, head of research at Standard Chartered Bank Korea, Eric Robertsen, global head of research and chief strategist at Standard Chartered Bank, Ding Shuang, the banking group's managing director and chief economist, and Arup Ghosh, co-head of Asia rates research, take part in a panel discussion during the 2024 Global Research Briefing hosted by the Korean unit of the group in Seoul, Friday. (Standard Chartered Bank Korea)

South Korea’s sovereign bond market is likely to be included among the top grade of global market indices, as abating inflation revives investors’ appetite for government bonds, according to economists from Standard Chartered Group on Friday.

At the 2024 Global Research Briefing conference hosted by the Korean unit in Seoul, Arup Ghosh, Standard Chartered Bank's co-head of Asia rates research, predicted that Korean treasury bonds will take a positive turn this year due to the trend of easing inflation.

This may lead to the country’s inclusion in the World Government Bond Index, a broad index operated by FTSE Russell, designed to measure the performance of government bond markets, including local currencies and sovereign bonds of major advanced nations.

“The possibility of inclusion in the WGBI is gaining strength due to the continued buying of government bonds by foreigners since last year,” Ghosh said.

After FTSE Russell added Korea to a watch list for potential inclusion in its WGBI in 2022, Korean authorities undertook efforts to get its sovereign bond included in the WGBI in March and September last year, but those ended in failure.

According to the Finance Ministry, the WGBI inclusion would lead to an inflow of foreign investment worth 50 trillion to 60 trillion won ($37.4 billion to $44.9 billion).

“The won is expected to strengthen due to factors such as the recovery of the semiconductor sector, increase in current account balance and decline in US Treasury yields,” Ghosh said.

The country’s slowing inflation and the strong won have created policy room for the central bank to ease monetary policy even amid fiscal tightening, he suggested.

Eric Robertsen, global head of research and chief strategist at Standard Chartered Bank, expected that 2024 will be the year that central banks around the world are likely to implement “the most aggressive monetary easing policies in decades.”

He said he is leaning toward a soft landing of the global economy as growth in Asia is projected to remain strong at 4.9 percent, although advanced economies’ average annual growth rate is expected to slow to around 1 percent.

He cited “ongoing inflation, geopolitical factors in the Middle East and Ukraine, the ongoing conflict between the US and China and the US presidential election in November 2024” as key variables in determining whether a soft landing will be successful.

Some 170 people from Korean firms and financial institutions participated in the event, in which the bank invited clients to share their outlook on global macroeconomic issues with experts from Standard Chartered Group.

By Park Han-na (hnpark@heraldcorp.com)