Jin Seungho, KIC President: "8.25% Profit Rate in First Half... Global Economy Expected to Land Softly"

Jin Seung-ho, President of Korea Investment Corporation (KIC), stated, "We have a high probability of the global economy achieving a soft landing this year," adding, "The likelihood of a severe recession in the second half of the year is low."

At a press conference held on the 13th at the Korea Federation of Banks in Jung-gu, Seoul, commemorating KIC's 18th anniversary, President Jin said, "Although concerns about an economic recession were significant, the fundamentals of economic agents such as households and corporations remain solid."

He explained, "While it is inevitable that the economy will slow down to some extent due to the continued high interest rate environment, our basic scenario for investment strategy is that the economy will either pass through a mild recession or stabilize overall as inflation declines, leading to stabilization in consumption and investment."

He also anticipated that as inflation stabilizes and the economy slows, market interest rates will gradually face downward pressure. He judged that the possibility of a sharp short-term drop in prices of risk assets, including stocks, is limited.

However, he cautioned, "As we approach the end of the year, the cumulative effects of interest rate hikes may have a delayed negative impact on the economy," urging, "We will continue to closely monitor real economic indicators."

Despite a volatile market environment in the first half of this year, KIC recorded a return of 8.25% on traditional asset investments such as stocks and bonds.

KIC posted a -14.36% return last year, but this year has seen a significant turnaround. As of the end of June, the stock return was recorded at 14.39%, while bond returns stood at 1.87% during the same period.

President Jin explained, "With a healthy real economy maintained mainly in the United States and other major advanced countries, concerns about a hard landing and recession have diminished, reviving risk asset preference sentiment, which has led to a significant rise in stock prices."

Following the first quarter, there was a perception that inflation had peaked, and concerns about tightening eased somewhat.

Although volatility in the financial sector increased due to incidents such as the Silicon Valley Bank (SVB) crisis in March this year, President Jin mentioned that KIC had managed risk by maintaining a lower-than-benchmark allocation to the financial sector even before the SVB incident.

The steady expansion of investments in U.S. technology stocks amid the AI boom triggered by Chat GPT this year also positively contributed to returns.

Alternative asset returns are revalued annually at year-end, and as of the end of last year, the five-year annualized return was 9.68%.

President Jin also announced a mid-to-long-term plan to improve KIC's investment performance. He stated, "We plan to increase the proportion of alternative investments to 25% by 2025." At the time of his appointment in 2021, the alternative investment ratio was about 16% of the total portfolio, which increased to 23% last year.

He added, "As part of securing new investment bases, we are aiming to establish an office in Mumbai, India, by the end of this year." India is a key beneficiary of the global supply chain restructuring and the world's most populous country, rapidly emerging as a new center of the global economy.

President Jin emphasized, "Through the establishment of the Mumbai office, KIC will take the lead in discovering excellent alternative investment opportunities such as ventures and infrastructure locally in India and expanding Korea's investment territory."

He also said, "We are pursuing plans to participate as a co-investor to support domestic companies when they engage in overseas mergers and acquisitions (M&A) to secure advanced technologies," adding, "We will actively seek co-investment opportunities focusing on structurally growing industries and strategically important industries at the national level."

Meanwhile, the sovereign wealth fund KIC started in 2005 with assets under management of $1 billion. Currently, the asset size is about $180 billion (approximately 230 trillion KRW). Since its establishment, KIC has generated approximately $70 billion (about 90 trillion KRW) in returns through investments. It has pioneered overseas investments in various fields including stocks, bonds, real estate, infrastructure, and private equity. In 18 years since its founding, it has grown into the 14th largest sovereign wealth fund globally.

This content was produced with the assistance of AI translation services.