KIC: "Eurozone Economy to Remain Stable Next Year... Policy Rate Likely on Hold"

International Financial Council Held at London Branch, UK

The Korea Investment Corporation (KIC), the national wealth fund, invited Korean institutional investors and local investment professionals in the United Kingdom to discuss the outlook for the European economy next year. The consensus was that Europe is likely to continue its growth trajectory in a more robust and stable manner than expected, with a high probability that the benchmark interest rate will remain unchanged.

Korea Investment Corporation announced on the 2nd that its London branch hosted the 34th 'London International Financial Council' on December 1.

More than 30 representatives from the Korean government and public investment institutions, as well as from private financial institutions such as securities firms, banks, and insurance companies, attended the event.

Chris Hare, Chief European Economist at HSBC, who delivered the keynote presentation, predicted, "The Eurozone economy has shown more resilience than expected this year, and will likely maintain stable growth of around 1.0% next year." He also noted, "While Eurozone inflation is expected to remain stable for the time being, a slowdown in wage declines could push inflation above 2% by 2027." He added, "Accordingly, the European Central Bank (ECB) policy rate is likely to remain on hold next year, with a rate hike cycle possibly beginning in 2027."

Jin Lee Song, strategist at HSBC, offered a positive outlook for Eurozone bond market yields next year, but also anticipated that credit spreads (interest rate differentials) could gradually widen. He cited increased corporate borrowing, driven by rising capital expenditures related to artificial intelligence (AI) and data centers, as the main reason.

Regarding bond investment strategies for next year, he said, "A differentiated approach by sector and rating will be key to performance," and predicted, "Strategies that leverage spread differentials based on structural changes by industry and differences in corporate fundamentals will be effective."

Lee Geonwoong, Head of KIC's London branch, said, "It was a valuable opportunity to comprehensively review the European economic and bond market environment, key variables, and investment strategies for next year."