Jin Seung-ho, KIC President, "8.25% Profit Rate in First Half... Relocation to Jeonju Unrealistic" (Comprehensive)

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

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

He explained, "While it is inevitable that the economy will slow down somewhat due to the continued high interest rate environment, our basic scenario is that the economy will either pass through a mild recession or stabilize overall as prices fall, leading to stabilization in consumption and investment. We are establishing our investment strategy based on this."

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 base rate hikes may have a delayed negative impact on the economy," urging, "We will continue to closely monitor real economy indicators."

Despite a highly 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 this year, the stock return was recorded at 14.39%. During the same period, bond returns were 1.87%.

President Jin explained, "With a solid 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 resulted in a significant rise in stock prices."

Following the first quarter, the perception that inflation has peaked and concerns about tightening have somewhat eased.

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 investing in the financial sector at a lower weight than the benchmark 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 said, "We plan to increase the proportion of alternative investments to 25% by 2025." When President Jin took office in 2021, the alternative investment portion of the total portfolio was about 16%, 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 region 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 the territory of Korean investments."

He also said, "We are pursuing a plan 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 industries with expected structural growth and strategically important industries at the national level."

President Jin also revealed KIC's official stance on the relocation to Jeonju for the first time that day.

He said, "Having previously served as the head of planning at the National Balanced Development Committee, I fully understand the reasons and background for wanting to attract KIC to Jeonju," but added, "There are practical difficulties."

He explained, "Currently, KIC does not have many staff and only invests overseas, but if we move to Jeonju, many personnel will leave."

He further stated, "There are many overseas business trips and many foreign clients visit, so there are various inconveniences," adding, "While I understand the situation in Jeonju, relocating KIC does not seem to be the solution to these problems."

Earlier in May, Yang Kyung-sook, a member of the Democratic Party of Korea, introduced a bill to relocate KIC's headquarters to Jeonju. Under current law, the location of KIC's office is stipulated in its articles of incorporation, which specify that the main office must be in Seoul.

Meanwhile, the sovereign wealth fund KIC started in 2005 with $1 billion in assets under management. Its current scale is $180 billion (approximately 230 trillion KRW). Since its establishment, KIC has generated about $70 billion (approximately 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 world's 14th largest sovereign wealth fund.

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