On March 22, South Korean President Yoon nominated Shin Hyun-song, currently head of the Monetary and Economic Department at the Bank for International Settlements, as the next governor of the Bank of Korea (BoK), succeeding Rhee Chang-yong when his term ends on April 20 [1]. DBS Group Research economist Ma Tieying notes that Shin is perceived as more hawkish due to his focus on financial stability and leverage risks, but expects his policy approach to be balanced and pragmatic rather than leaning toward imminent tightening, especially given elevated geopolitical uncertainty and ongoing oil price volatility [1].
KRW rates markets have priced in aggressive tightening, with OIS/swap markets expecting a 25bp hike to 2.75% within six months and around 100bp of cumulative hikes to 3.50% within 12 months. DBS considers this outlook overly aggressive relative to the macro backdrop and Shin’s expected policy framework, suggesting scope for downward repricing in front-end KRW rates and Korean Treasury Bond (KTB) yields, particularly after the May policy meeting when the BoK will release updated macro forecasts and its rate projection 'dot plot' [1].
South Korean assets have experienced significant volatility, with the KRW weakening by approximately 5% month-to-date and breaching 1,500 against the USD. The KOSPI index has declined by more than 10%, and foreign investors recorded net equity outflows of about KRW 20.6 trillion in the first 20 days of March [1]. DBS expects continued FX and equity volatility, driven primarily by external factors such as Middle East tensions and global energy price dynamics, given South Korea’s high dependence on energy imports and its cyclical exposure to global trade [1].
CONCLUSION
The nomination of Shin Hyun-song as BoK governor is expected to bring a balanced policy approach, countering market expectations of aggressive tightening. Despite recent volatility in the KRW and KOSPI, DBS anticipates continued sensitivity to global risk sentiment and external factors. Investors should watch for further repricing in KRW rates and asset volatility, especially after the May BoK policy meeting.