Banks expect the Bank of Korea to raise rates in the second half 1∼2 times; recommend increasing allocations to AI and semiconductors

Commercial bank experts expect the Bank of Korea to raise its benchmark rate 1∼2 times in the second half. The outlook was presented in an analysis summarizing the banking sector's interest-rate scenarios. Banks believe the Bank of Korea's future decisions will affect market interest rates.

Banks said that expectations for a total of 3∼4 rate hikes have already been priced into financial markets. This means that market participants have already factored in a certain portion of the expected interest-rate path. The report pointed to a gap between market expectations and policy decisions.

Banks also proposed adjustments to investment portfolios. Their main recommendation was to increase allocations to the AI and semiconductor sectors. The recommendations were presented in the form of research reports by individual banks.

The report concluded that sector allocations and the interest-rate path should be considered together. Specific stock recommendations and weightings differed by bank. It stated that investment decisions may vary from person to person.

This view reflects a synthesis of forecasts from experts at commercial banks. The Bank of Korea’s final decision will be determined at a future Monetary Policy Board meeting. Market reactions may vary depending on the outcome of the meeting.

Banking-sector reports recommended combining portfolio adjustments with risk management. Banks advised investors to review the detailed rationale in each report. The specific implementation was left to investors’ judgment.