While the global economy is generally recovering, uncertainty persists due to the recurrence and prolongation of the COVID-19 pandemic and Korea's manufacturing sector is recovering, the service sector continues to experience a slowdown due to COVID-19. The Bank of Korea expects South Korea's economic growth to recover to a range of 2.1-4.8% in 2021, predicting that the country's economy will recover to 3.0% growth this year as the global economy continues to improve moderately due to the impact of stimulus programs in major economies and improving global investor sentiment.

1. Korea Financial
Market Review
January. 2021
Korea Financial Market Review

2. Contents
2
1. Economic Trend and Issue
1.1 Global Economy
1.2 Korea Economy
2. Korean Financial Market Analysis
2.1 Credit Market
2.2 Foreign Exchange Market
2.3 Equity Market
3. Conclusion

3. 1. Economic Trend and Issue
1.1 Global Economy
3
World Economy Growth Rate by Region
While the global economy is generally recovering, uncertainty persists due to the recurrence and prolongation of the COVID-19 pandemic and
Korea's manufacturing sector is recovering, the service sector continues to experience a slowdown due to COVID-19.
US
EU
CHINA
JAPAN
 Retail sales continue to decline for the third consecutive
month, falling 0.7 percent YoY in December amid
COVID-19 resurgence
 Unemployment rate remained unchanged in December,
indicating a slowing labor market recovery
 Euro Retail sales fell 6.1% YoY in November as
European consumption, which had been showing some
signs of recovery, was significantly curtailed by
lockdowns amid the resurgence of COVID-19.
 China's economy shows signs of recovery, with domestic
indicators of production, investment, and consumption
showing modest growth, while exports post double-digit
gains
 Industrial production growth returns to pre-COVID-19
levels, driven by strong commodity exports
 Japan's economy continues to be weak. Indicators of
private consumption contracted again, and declines in
exports and production widened.
Economic Trends

4. 1. Economic Trend and Issue
1.2 Korea Economy
4
Economic growth trends and forecasts from organizations
TheBankofKoreaexpectsSouthKorea'seconomicgrowthtorecovertoarangeof2.1-4.8%in2021,predicting thatthecountry'seconomywillrecoverto3.0%growththisyearas
theglobaleconomycontinuestoimprovemoderatelyduetotheimpactofstimulusprogramsinmajoreconomiesandimprovingglobalinvestorsentiment.
Key economic indicators outlook
4.8

5. 1. Economic Trend and Issue
1.2 Korea Economy > Major economic activity trends
5
 December Industrial Production rose MoM as
services declined but mining output rose
 Industrial production rose 0.5% MoM (down 0.3%
YoY) as services declined (-1.1%) and mining rose
(3.7%).
Production Consumption
 Retail sales declined sharply in December, with
sales of semi-durable goods such as apparel
falling due to reduced outdoor activities in
response to increased social distancing, but
sales of non-durable goods such as food and
beverages rose slightly due to increased
demand for home meals.
Investment
 Capital expenditures turned positive in
transportation equipment, but grew modestly m/m,
with a significant slowdown in machinery.
 Transportation equipment switched to growth
(3.4%) from a decline (-4.8%) in the previous
month, but machinery saw a much smaller
increase (0.2%) than in the previous month
(6.5%).
MoM(%)
Indusrial & Mining Service IT
MoM YoY MoM YoY

6. 2. Korean Financial Market Analysis
2.1 Credit Market
6
InDecember2020,Korea'screditriskindicatorsremainedflatatthelowestlevelsincetheglobalfinancialcrisis,buttheprivatecredit/nominalGDPratio,whichindicatesthelevel
ofleverageoftheprivatesector,includinghouseholdsandcorporations,increasedsignificantly(+16.6percentagepoints)to211.2%attheendofthethirdquarterof2020.
Korea CDS Premiums Remain at Lowest Levels Private sector credit growth
 Private credit/nominal GDP ratio surges upward, up 16.6
percentage points YoY
 This was due to the expansion of private credit growth,
driven by increased lending to households and
businesses, as well as a significant slowdown in nominal
GDP growth due to the impact of COVID-19.
 Private credit growth (year-on-year) accelerated to 8.9%
at the end of Q3 2020 from 6.4% at the end of the
previous year, while nominal GDP growth (year-on-year)
slowed by 0.7 percentage points to 0.4% in Q3 2020
from 1.1% in Q4 2019.
Household
Credit
Corporate
Credit
 Household credit reached KRW 1,766.7 trillion at the end of Q4 2020,
gradually increasing since Q4 last year
 Need to be aware of the possibility of increased risk of nonperformance,
especially among vulnerable households, if income conditions remain
weak due to delayed economic recovery.
 Corporate loans ended Q4 2020 at KRW 1,393.6 trillion, up 15.4% YoY
 Lending to both large and small businesses has increased significantly in
response to the prolonged COVID-19 outbreak and more

7. 2. Korean Financial Market Analysis
2.1 Credit Market > Issue (1/2)
7
Increase in household borrowing among young adults
Householdborrowinghasbeenincreasinglyexpandingthisyear,withhouseholdborrowingamongpeopleintheir20sand30s("youngadults")growingfasterthananyotheragegroup.
Young adult household loans change ratio Key reasons for the increase
Increased
demand for
rent and home
loans
Growing
demand for
Stock
investment
funds
Increased
Usage of
Mobile Fintech
Apps
 Increase in the number of young adults living in single-person households and the
government's support for housing stability for young adult households (aged 24-34)
has led to an increase in both the demand and supply of rental funds for young
adults.
 Significant increase in the volume of home sales transactions due to expectations
of rising home prices, with transactions in their 30s accounting for the largest share
of the total.
 Individual equity investments have increased significantly since the plunge in stock
prices due to the spread of COVID-19, and demand for leveraged investment funds
has expanded rapidly, especially among young people
 While credit loans2) expanded for all age groups, those under 30 (94.2%) recorded
the highest increase in credit loans, along with those over 60 (95.9%).
 Increased competition for mobile-based non-face-to-face credit loans due to the
launch of Internet specialized banks and fintech innovations also contributed to the
increase in loans among young people who are familiar with this environment
 The share of loan growth through e-finance channels in total bank loan growth
increased from 28.7% in 2019 to 34.2% in January-September 2020
young adults
30’s
20’s
etc
20’s(Left) 30’s(Left)
etc(Left)
young adults(right)
trillion KRW
Note 1) YoY
2) young adults' share of household loan balances
source : BoK(Household loan DB)

8. 2. Korean Financial Market Analysis
2.1 Credit Market > Issue (2/2)
8
Increased credit risk for the self-employed as COVID-19 prolongs
Duetotheincreaseinnon-face-to-facetransactionsduetotheprolongedCOVID-19,saleshavedecreasedsignificantly,especiallyforself-employedindividuals1)whoprimarilyoperatethroughface-to-
facetransactions,adverselyaffectingthefinancialhealthofself-employedindividuals.
Sales and loan trends for the self-employed Impact of COVID-19 pandemic to the financial situation of the self-employed
Deficit
Liquidity Risk
Non-repayable
 Growth in deficit households among the self-employed depends largely on
whether the government extends the principal repayment moratorium
 If the government's measures are extended, the deficit household share
could remain at low levels of 16.6% and 19.3% in December next year under
the baseline and pessimistic scenarios, respectively
 Number of liquidity risk households facing liquidity shortfalls among self-
employed deficit households continues to rise despite government support
measures
 Under a pessimistic scenario, it is expected to rise sharply to 6.8%, almost
double the level in March this year
 Looking at insolvent households with negative net worth among the self-employed,
the share of insolvent households is expected to rise slightly by 1.3% through
March of this year
 Households facing both liquidity risk and insolvency (dual-risk households) are
unlikely to see their financial situation improve even after the effects of the
prolonged COVID-19 pandemic have passed.
Credit card by Covid19 Stages Loan growth by business line
3.1-5.5 (social distancing)
5.6-8.18 (everyday life distancing)
8.19-10.11 (enhanced distancing)
10.12-11.18 (mitigated distancing)
source : BoK
All Whole
sale
Lodg
ing
FoodLeisure
Non-
face-to-
face
Whole
sale
Lodg
ing
Food Leisure Real
Estate
Educa
tion

9. 2. Korean Financial Market Analysis
2.2 Foreign Exchange Market
9
The KRW/dollar exchange rate appreciated significantly due to improved global investor sentiment, rising US dollar index despite favorable Korean export
data, and favorable foreign exchange demand conditions, and the volatility of the exchange rate increased slightly from the previous month
USD exchange rate trends
1169.5
1108.9
1083.1
1114.6
1060
1080
1100
1120
1140
1160
1180
2020/10/05 2020/11/03 2020/12/01 2020/12/30 2021/01/28
KRW
USD/KRW
KRW exchange rate volatility
0.23
0.26
0.34 0.35
0.17
0.2
0.35
0.52
1.15
JPN US UK EURO IND CHN KOR RUS BRA
Exchange rate volatility of
major currencies in January
'21 (%)
 The KRW/dollar exchange rate rose against the US
dollar due to expectations of massive stimulus
following the Democratic Party's control of the US
Senate and House of Representatives, continued
public pressure on the US administration, and the
spread of the mutant virus.
 Volatility of the KRW/dollar exchange
rate in Jan. '21 was 0.35, compared to
0.32 in the previous month
 Compared to the currencies of major
economies, volatility was higher than
that of Asian counterparts such as Japan
and China
20.11 20.12 21.1
Change
(KRW)
4.1 3.5 3.8
Percent
Change
(%)
0.36 0.32 0.35
Volatility of the USD exchange rate
(Average over time)
source : Bank of Korea source : Bank of Korea

10. 2. Korean Financial Market Analysis
2.2 Foreign Exchange Market > Issue
10
InJanuary,foreignersnetsoldKRW2.65 trillionindomesticequitiesandnetinvestedKRW1.15trillioninbonds,duetohighgovernmentbondinterestratescomparedtosimilarlyratedcountries.
Outflows and inflows of foreign securities investment funds
 In January 21, foreigners net sold KRW 2.65
trillion* of listed stocks, but held KRW 787.9
trillion (+23.6 trillion from the previous month)
due to stock price appreciation (31.6% of
market capitalization)
 Estimated to be due to the realization of
profits from the short-term surge in the
KOSPI and increased anxiety due to the US
GameStop short-selling issue
Investment trends by security type
 Foreigners net purchased KRW 3.79 trillion
in listed bonds in Jan. 21, but net invested
KRW 1.15 trillion due to maturity
redemptions of KRW 2.64 trillion.
 Foreigners held a total of KRW 151.5 trillion
(+1.4 trillion from the previous month) at the
end of January 21 (7.3%)
Stock
Bond
-21.9-23.9
-1.7
13.2
-120
-100
-80
-60
-40
-20
0
20
40
60
80
Stock Bond
source : Bank of Korea
Jan-19 Jan-20 Jan-21

11. 32
33
34
35
36
37
38
39
40
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
Market capitalization
Percentage of foreign Investment
2. Korean Financial Market Analysis
2.2 Equity Market
11
AsU.S.interestratesroseinJanuary2021,long-termTreasuryyieldsroseinlinewiththem,andequitypricescontinuedtoriseamidmixedresultsasinvestorsweighedtheimpact
ofconflictingeconomicdata,vaccinationsinmajoreconomies,andexpansionarymonetarypoliciesamidtheongoingCOVID-19pandemic.
Trends in Bond Yield Stock market trends
0.971
1.77
2.092
0
0.5
1
1.5
2
2.5
3
3.5
Treasury Bond (3Y)
Treasury Bond(10Y)
Corporate Bond(3Y, AA-) Treasury bond rates rose
substantially along with major
economies due to supply and
demand pressure from the
supplementary budget plan and
improved economic data, while
interest rate volatility declined.
Corporate bond credit spreads
narrowed significantly, especially in
blue chips, due to government and
Bank of Korea support measures.
“Rising long-term bond
markets”
“Narrowed corporate bond
credit spreads”
South Korea's stock market
continues to see retail buying,
with the KOSPI breaking 3,100
for the first time ever on Jan. 8,
2021, but risks of a rapid surge
are mounting
“Stock prices continue to rise”
The price-to-earnings ratio (PER)
rose to 13.09x in mid-August in
response to rising stock prices,
but has since fallen as
expectations of improved
earnings have spread quickly
"PER down slightly, PBR up”
source : Financial Supervisory Service Statistics
source : Korea Financial Investment Association Statistics

12. 2. Korean Financial Market Analysis
2.2 Equity Market > Issue
12
Duetotheincreaseinnon-face-to-facetransactionsduetotheprolongedCOVID-19,saleshavedecreasedsignificantly,especiallyforself-employedindividuals1)whoprimarilyoperatethroughface-to-
facetransactions,adverselyaffectingthefinancialhealthofself-employedindividuals.
The surge in leveraged equity investing
 More individuals are actively investing in stocks, and the size of their credit
contribution balances soar
 Major securities firms such as Samsung Securities, NH Investment & Securities,
and Mirae Asset Daewoo have suspended credit and stock collateralized loans in
January 2021 due to the exhaustion of their credit facility limits.
Stock market issues
 The volatility of the KOSPI is increasing, and so is the volume of contrarian
trading. KOSPI index rises from 2,634 on December 1, 2020 to 3,209 on
January 25, 2021
 The growing disconnect between the real economy and the stock market,
coupled with the stock bubble debate, increases the likelihood that retail
investors will be harmed if the stock market is hit by external variables.
Leveraged
investment
surges
Increased
volatility risk
0
500
1000
1500
2000
2500
3000
3500
0
2000000
4000000
6000000
8000000
10000000
12000000
1/2/2018 1/2/2019 1/2/2020 1/2/2021
Credit financing KOSPI

13. 3. Conclusion
Market Highlight and Investment Strategy
13
South Korean
stocks continue to
rise, but beware of
overheating
Market Highlight Investment Strategy
 The outlook for the Korean stock market in
2021 is still more cloudy than sunny, with the
KOSPI's 21-year EPS growth outperforming
the rest of the world since the start of the
year outperforming other emerging markets
such as Taiwan, China, and India
 However, the decline in the yield gap in
domestic stocks was relatively steeper than
in other markets.
Rising credit balances
among individual
investors also spurred
anxiety of market
adjustment
Sectors with lower valuation pressures and lower credit
growth than KOSPI benchmarks have a relative advantage
 Individuals' Credit Loan Balances rise in line
with the adjustment, stimulating anxiety’
 KOSPI's monthly increase in credit loan
balances up to January 15 (+14 trillion won)
was the steepest since the March
 Stock market needs to take a breathe in the
short term as valuations rise and credit risks
are highlighted
AsU.S.interestratesroseinJanuary2021,long-termTreasuryyieldsroseinlinewiththem,andequitypricescontinuedtoriseamidmixedresultsasinvestorsweighedtheimpact
ofconflictingeconomicdata,vaccinationsinmajoreconomies,andexpansionarymonetarypoliciesamidtheongoingCOVID-19pandemic.
Credit Loan Growth Rate(%p)
Increased valuation(multiple)
0.4
0.3
0.2
0.1
0
-0.1
-0.2
-0.3
-10 -5 0 5 10 15 20 25
Steel
Display
NonFerros
Security
Distribution
KOSPI
semiconduct
Transportation
Machinery
IT H/W
Banking
S/W
Beauty
Hotel
Home Appliance
Chemical
Car
Energy
Shipbuilding
source : Quantwise, Hana Financial Investment

14. 14
Thank You
Korea Financial Market
Review