M&G Backs Korean Bond Market Rally: Are Rate Hike Fears Overdone?

M&G Investments is betting on a rally in South Korean government bonds, arguing the Bank of Korea (BOK) will slow its rate hike cycle even as most investors brace for more tightening.

M&G is a London-based global asset manager listed on the FTSE 100, overseeing more than £300 billion for pension funds, insurers and other institutional clients worldwide.

A Central Bank Leaning Hawkish

The BOK raised its benchmark rate a quarter point to 2.75% in July, its first rate hike since early 2023, after growth and inflation data ran hotter than expected. South Korea's economy expanded 0.6% in the second quarter, and consumer prices rose 2.8% in July, still above the central bank's 2% target.

Outgoing senior deputy governor Ryoo Sangdai said last week that further hikes remain likely, with policymakers weighing core inflation, growth momentum and financial stability risks ahead of the BOK's Aug. 27 policy meeting.

Ryoo downplayed the recent won stabilization and a KOSPI pullback as factors for the board, saying inflation trends will carry far more weight in the decision.

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