Daybreak Weekend: US Housing, Germany Summit, BOK Decision

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This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight ahead on the program, we look to housing data, along with some key media and tech earnings in the U.S. I'm Nathan Hager in Washington.

I'm Caroline Hepger in London, where we're looking at Germany's pitch to investors at a key summit in Berlin.

I'm Doug Krisner looking at the South Korean economy and the approaching rate decision from the Bank of Korea.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App.

Good day to you. I'm Nathan Hager. We begin today's program with some key housing data in the U.S. On Tuesday, we get reports on new home projects getting started in September, plus a look at home sales that were still waiting to be closed.

In the month.

For more on this and the overall outlook for the home building sector, we want to bring in Drew Redding. He's U.S. home building analyst for Bloomberg Intelligence. Always great to speak with you, Drew. Of course, we've talked many times before about how Not so great, this housing environment's been with prices and mortgage rates still elevated. So what are we expecting from this latest data for September?

Yeah, so the market has gotten increasingly challenging through the summer and into the early fall. Looking ahead to the pending home sales data, the consensus is looking for about a 1% sequential increase. But I think the risk is certainly skewed to the downside. We've got some high-frequency data from Redfin that shows that pending home sales were actually down 4% sequentially last month, which is the lowest level since 2014, excluding the pandemic. You know, we've got mortgage rates around 7.5%, and consumer confidence, particularly as it relates towards housing, continues to deteriorate. You know, more deals are falling through. We actually had about 15% of transactions being canceled, which you know, is due in part to the sticker

shock that consumers are seeing, but also buyers having more leverage with greater inventory and a slower sales environment. So, you know, the challenges across the market are pretty broad-based. There's really no market or segment that's entirely insulated from these pressures. So we've got, you know, if you look across the top 50 U.S. housing markets, pending sales are down across all of them. So, you know, with rates higher, there's certainly a lot of pressure on the consumer.

Of course, we did see, I guess, a surprise increase in existing home sales this past week. I guess these numbers that came out kind of before we really saw this surge in mortgage rates in recent weeks. Does that kind of change how the outlook could come out based on these September numbers?

So it's important to keep in mind when you're looking at existing home sales numbers, those are closed transactions. So it's really deals that were signed 30 to 60 days ago, which don't necessarily reflect the current market environment. So just looking at them in isolation is a little bit of a lagged view at the market. You know, some of the more high frequency data we looked at, like depending home sales we just discussed. We've also got data on mortgage purchase applications, which continue to soften, particularly in the new home market. When you look at the builder application survey, which looks at the captive financing arm of the largest builders, sales are down about 8% from last year. So I

think these are the more kind of high frequency indicators that reflect the current reality in the market. And we are seeing a softening of demand. Yeah.

I mean, you got to wonder whether there's really an incentive for builders to build right now, given the headwinds that we've talked about for all this time. Do you see any incentive right now?

That's a great question. And we'll get housing starts data next week as well. And we think that this week at demand environment is going to influence how we see the builders behave. And I think will continue to be reflected in single family starts. You know, as we've discussed in the past, builders have kind of shifted their strategy over the last year or so to focus on matching production with sales in order to not add more supply into the market. And at the same time, you still have an elevated supply of completed new home inventory. So The focus has really been on drawing down that existing inventory, which, you know, as we've said, typically requires a greater degree of incentives before putting new production in the ground. So,

you know, to your point, there's really not a whole lot of incentive with demand being as weak as it is to continue to put new product in the market.

Of course, I know the mortgage rate is reflected in the 10-year Treasury yield, but, you know, we're still waiting for a decision from the Federal Reserve when it comes to their benchmark interest rates. How does Fed policy affect how the outlook could go from here?

Yes, I think the 10-year Treasury and ultimately 30-year mortgage rates are already pricing in expectations for higher rates and, you know, higher inflation. So I think we're seeing that currently in the market. From the builder's perspective, what it does is these higher rates make the cost of buying down consumers' mortgage rates more expensive, which will continue to pressure margins. You The hope was that if mortgage rates were able to come down, they'd be able to take their foot off the gas pedal a little bit in terms of buying incentives. And if nothing else, at least the cost of them would come down, which could support a margin trough in 2026. But it looks like with inflation running a little bit hotter, we have higher oil prices,

higher gasoline prices. The Fed expected to take a little bit of a more hawkish stance that rates are certainly going to be higher for longer. All right.

Well, thanks for this, Drew, as we look ahead to the latest housing data to come later this week. That's Drew Redding, U.S. home building analyst for Bloomberg Intelligence. Let's take a look now at some stocks making news in the week ahead. I'm Nathan Hager, joined by Bloomberg earnings reporter Anne Guillen, because we have lots more earnings this week, including from some big names like Netflix due out on Tuesday.

And it seems like all the news about Netflix, well, most of it really has been pretty rough.

Yes, that's right, Nathan. So when Netflix reports next week, I think the main thing that investors are going to be watching is those viewer engagement levels. And so even if revenue and everything is in line with projections, I think investors are really, really scrutinizing Netflix's audience engagement really closely right now.

Absolutely. I mean, it doesn't seem like there's a whole lot of new blockbuster content coming out, but they've really expanded the slate, not just for... scripted shows, but now you see all these podcasts and live sporting events as well. What do investors want to see this time around?

Yeah, I think investors want to see those viewing hours start to reverse their decline. They were down almost 11% from last year. And viewership just in general, like the number of viewers is declining as well. And that is most of that weakness is in TV shows. So I think adding some of the live sports, some of the podcasts, some of that kind of shorter form content, I think Netflix is really hoping that both kind of draws viewers back in general and also keeps them watching Netflix for longer.

Are investors going to be drawn back as well when we think about the loss that Netflix had with the Warner Brothers Discovery bidding war and now these job cuts that were just announced in recent days?

I think investors want to see that Netflix can have that content that really resonates with their audience without totally tanking their margins. So I think pricing, their ad business, and also just kind of the general operating costs of the business are really going to be in focus, which I think you see those layoffs that were reported this week about 5% of their workforce. I think investors are going to want to hear what Netflix plans to do with those savings, whether it's more marketing, just boosting kind of the margins more generally. I think investors are definitely going to want to hear what the next steps for Netflix are.

All right.

So we'll be looking for that on Tuesday. And then another big day on Wednesday, we're going to get results from Tesla after the bell in the middle of the week. Of course, they promised us flying cars or... Are we expecting a return to flying results for Elon Musk's CV maker?

Well, we'll hear about the flying cars this week before earnings. But yes, so Tesla's delivery numbers came out a couple of days ago, and they mostly were good, mostly were in line with what investors were expecting. expecting. But I think the big question for investors headed into Tesla earnings is definitely their CapEx. They've said they want to spend $ 25 billion in capital expenditures this year, which is triple the amount that they spent last year. So I think investors have a lot of questions. That's a hefty price tag.

And they want to know as much as they can about where that spending is going. Two kind of big areas of investment for Tesla right now are the rollout of the cyber cab, as well as the development of the Optimus robots. And those projects have both taken a lot longer than Elon Musk had kind of originally promised.

So I think investors are watching very closely on those two projects and definitely want to hear a little bit more about where all that spending is going.

Okay.

Big part of the piece of this idea that Tesla isn't just a car company, but it's an AI company as well. And that feeds into Elon Musk's other big company, which he's trying to position in the AI space as well, SpaceX. There's so much talk about whether these two companies are going to merge. Is this the quarter that we hear more about that?

It might be. There was a note from Barclays earlier this week that said they think that a merger between Tesla and SpaceX could be announced before the end of the year, in particular before Tesla's annual general meeting, which is on December 6th. And they said in their note that basically a merger between Tesla and SpaceX is basically expected at this point. And so whether we hear about it during earnings, whether we hear about it before the AGM, I think investors are really kind of reading the tea leaves as closely as they can to understand how that deal might be structured. Musk, he's certainly... has done mergers or combinations or partnerships of all of his different companies before.

So I think investors will just really want to understand what a potential deal could look like and what it means for them, obviously.

And just the idea of big tech getting even bigger and just those companies in Elon Musk's orbit and thinking about big tech as well, We're going to start to hear from the Mag7 this week with Meta Platforms reporting on Wednesday as well. Seems like a lot's been going right.

For Meta lately.

Yes, Meta.

They were seen as very much on the back foot in the AI race for a long time, but that narrative has really changed this quarter. And the primary driver of that was the release of Muse, which is their personal AI agent. The Muse app already has 5 million downloads in less than a month after its release. And it held the top spot on Apple's App Store downloads for several weeks. It actually just fell out of the top spot. And it appears to have a lot of positive momentum. So this is a really big win for Meta.

And so I think investors are going to want to hear about what kind of the future roadmap for Muse looks like. And monetization, I think, is certainly a key area that they're going to have questions about. Right now it's free to use, but Meta famously makes pretty much all of their money from advertising revenue. So I think investors are going to want to start to hear about how Meta envisions fitting Muse into the rest of their product ecosystem, fitting it into their ad business. And so I think But I think Muse has done a lot to really kind of positively change the narrative for Meta.

Yeah, it'll be interesting to see whether it changes the narrative for big tech more broadly as well after the sell-off we've seen in recent days in tech stocks. Thank you for this, Anne. Great to have you with us. That's Bloomberg earnings reporter Anne Guillen. And coming up on Bloomberg Daybreak Weekend, we'll look ahead to Germany's pitch to investors at a key summit coming up in Berlin. I'm Nathan Hager, and.

This is Bloomberg.

This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. Later in the program, we'll look to an interest rate decision coming up this week from the Bank of Korea. But first, Germany's chancellor is making a pitch to global investors to bring their money to Europe's largest economy. But a fragile coalition and Friedrich Merz's own approval ratings have some wondering if he'll still be in power to see Germany's fortunes improve. Let's get more now from Bloomberg Daybreak Europe anchor Caroline Hepker.

Nathan, once Europe's powerhouse, Germany finds itself on the world stage, exposed. High energy costs, competition with China and America's trade tariffs all weigh more heavily on the world's third largest economy than many of its peers. Bettina Orlop runs one of Germany's leading banks, Commerzbank. She tells Bloomberg's Lisa Abramowitz that money is starting to come back.

German clients investing abroad in the US and in Asia. What we have seen still to a much lesser extent than we wish for are real investments into Germany. And we hope that given that now there are more positive signals on German economy and you probably also have seen the latest upgrades of our GDP growth. that we will now see much more growth, also loan demand in Germany.

I have to say we are not seeing it yet.

Really?

And not even from the infrastructure plans that Germany has?

I mean, there are exceptions. If you look into certain areas like infrastructure, like defense, renewable energy to a certain extent, you see and also machinery is recovering there. You see a lot also supported by the investment programs of the German government. But if you take it overall and if you look specifically in our strong client base, which is the Mittelstand, you do not see it yet.

How much have higher yields really crimped the ability to borrow.

From a lot of these companies?

I think it's less the interest rate level, which is a problem. It's more the overall environment. It's always energy costs, bureaucracy, labor costs, resource constraints, things like that, which are more hindering. And the overall sentiment, which is improving in the moment, but these are more the barriers than really higher interest rates.

Commerzbank CEO Bettina Orlopp there But Chancellor Friedrich Merz has lost recent regional elections, both to the far right and to the far left, as he tries to reform the government. In the next few days, he will host some of the leading lights of global business in Berlin as he tries to make the case for investing in Germany. Joining us now is Chris Bryant, our opinion columnist in Berlin. Chris, good to speak to you. Before we get into the nuts and bolts of the event... What's the state of the German economy now? What is the feeling within the country, do you think?

Germany remains, I think it's fair to say, in a bit of a fraught situation. We've had six years now of very, very limited, if any, economic growth. And it's really started to weigh on the economy. It's in terms of people wanting to invest here, in terms of business optimism and so forth. Now, the good news is, we should mention the good news, growth has returned just recently.

It's still early days, but we're looking at maybe economic growth of more than 1%, I think, this year now, according to the revised government forecast. And that is a notable improvement. 1% is nothing to scream from the rooftops about, but it's not bad. It's a start. And that reflects the fact that Germany has made some really important decisions regarding how it's going to invest in infrastructure, how it's going to fund its military. And that's starting to feed through now into more confidence and more economic growth. So early stages, but looking a little better than it has economically for a while.

Yeah, I mean, Germany has long been the sort of prudent giant of the European Union. So I suppose it is about, you know, why people are concerned about it now and whether there is, you know, an opportunity to change course.

I mean, I think there is. And Chancellor Friedrich Mayer very sensibly did something as he came into office, finally releasing the spending taps. Germany had long had this reputation for really not funding its infrastructure properly. And he came in and said, OK, we're going to do that now. They have a big spending pot, you know, hundreds of billions to spend on that over the next few years.

And that is great. Anybody who's ridden the railways in Germany will tell you they're not nearly as reliable as one would hope. And as I say, the other thing he did was commit to fund the military property. Again, Germany underfunded that in the past, relied very much on having a military backstop from the United States, which now looks more questionable. And so they're doing that and that spending is starting to feed through now. So I think, you know, absolutely doing the right things. But, you know, it doesn't translate into political popularity, of course.

And Mr.

Mads is having a bit of trouble sending his message of the need for Germany to reform.

Yeah, you compared Chancellor Merz to the football manager Jurgen Klopp in a piece recently. Why did you make that comparison?

Well, I mean, Jurgen Klopp is very, very popular in Germany now, the coach again, and I think remains popular with fans across Europe. Very charismatic player.

Mr.

Metz has many qualities, but he has struggled, I think, by his own admission to connect with voters. And we saw that recently. We had two big votes in the eastern part of the country where, you know, the AFD made quite significant gains. That's the alternative for Germany, a far right party. And Metz's personal lack of popularity with the German voters clearly weighed on those results with its own party doing quite poorly. Now, I think rightly, Matt came out and said, look, I'm not going anywhere. Because I think the important thing is that Germany does deliver those reforms that investors want to see now. And I think his recipe for Germany in terms of what needs to change, and we can talk about that in terms

of pensions and so forth, is very important. Because Germany does face these structural headwinds to growth, things that will weigh on the potential output of the economy unless it counterbalances those. And so I think what Merz wants to do is important. The question is whether he can deliver it.

Yeah.

And so when we think about the Invest in Germany Summit, which is a sort of huge event, isn't it, with Merz, hosting, giving welcoming remarks, talking about why Germany, giving a sort of business perspective. What do you think that the German government pitch is to investors, you know, some really key investors?

You've got, for example, the chairman and CEO of BlackRock, Larry Fink, who's meant to be attending, Bettina Orloff, the CEO of Commerzbank, the Deutsche Bank CEO, Christian Saving will be there too. What do you think the government's pitch is to investors and business leaders?

Well, I think a key thing, as I said, will be to stress that Germany is very much now open for business, that, you know, it's realized it has these structural problems and it's doing things to counterbalance it. And I think they'll also emphasize that Germany has these really great strengths in its industry still. I mean, we do hear a lot of doom and gloom about the fact that, you know, for example, due to high energy costs, companies are worried about investing or investing more overseas than they are at home. But when we hear about the artificial intelligence boom, we don't obviously think immediately of Germany. But of course, Germany has these very great manufacturing strengths. And increasingly,

that's about technology and software, not just about metal bashing. Companies like Siemens, you name it. And these companies really do have those strengths in terms of being able to connect the physical world of factories with the data world and of artificial intelligence. So I think they'll very much hammer home that message. Another highlight, I would say, is that recently in Germany, you've seen a lot of startups being created. And I think we've got more unicorns, companies that are worth more than a billion euros or whatever.

That is a very positive sign. It's not a completely positive sign. One reason why you might found a startup is because you're struggling to get a job. And I think Germany's labor market is quite difficult moment with many of these industrial companies I mentioned also having to restructure and therefore there are layoffs and so forth, as we know, in the automotive sector. Nevertheless, the fact that people are founding startups is quite exciting. I'll mention one that I visited a few months ago that I think is very inspiring.

Isar Aerospace, not a household name yet, but it wants to be a kind of SpaceX for Europe. It managed to put a rocket into orbit, launched from Europe, based near Munich. And I think that's kind of exactly the kind of inspiring thing that we want to see out of Germany. And not just these traditional strengths, the companies that you know of for decades. But rather these new companies coming through, you have a big cluster around Munich, for example, sort of defence tech and these kind of data orientated and robotics companies I talked about. They're really quite impressive. So the more of that kind of thing I think we see, the more optimism can spread in Germany, despite the headwinds I mentioned.

Yeah, I mean, it's interesting, isn't it? Has the realisation sunk in, though, of course, that maybe Germany is paying the price for some of its pasts? ties for its close relationship, for example, with Russia taking Russian gas and being sort of quite reliant on energy. And it's also close relationship with China in terms of its big exports to China. Has Germany sort of taken that on board as it tries to reshape and focus on all these new and perhaps more exciting businesses?

I mean, I think that's a message that Matt has been hammering home. We can no longer depend on the Chinese market to soak up German exports. We can no longer rely on cheap Russian gas. And unfortunately, no, we can no longer rely on the U.S. to look out for our defense interests. We've got to take more responsibility for that ourselves. I think that message is being repeated over and over again. I think the problem is that some of the things that Germany has to do are inherently not very popular. I think the biggest worry, one of them for employers, is the issue of employment costs.

In particular, it's a complicated subject, social security. So the payments that you have to make every month in terms of things like your pension, long-term care, and unemployment insurance and so forth, those costs keep rising. And one of the issues is Germany has this very difficult demographic perspective, which is that increasingly we have the baby boomers, these very big generation are starting to retire and leaving the labor force, there will be fewer workers actually working and earning money, paying into the system to fund that. And if those costs continue to rise, the problem is it becomes less attractive for employers to create jobs in Germany.

It also becomes less attractive for people to actually work at all and sense that a bigger part of their income is being consumed by by those expenses that I mentioned. And some young people say, well, why should I pay into a system? I'm worried I'm not going to get out of it what I put in. And that's why Matt has emphasised the importance of things like pension reforms.

But as I said, those things are really not popular. People obviously rely on a nice pension. They don't want to give that away.

Chris, so interesting to speak to you. Thank you so much for your time. Chris Bryant is Bloomberg opinion columnist in Berlin, speaking to us ahead of the Germany Invest event that will take place in the next few days. And we'll bring you full coverage of the Invest in Germany Summit in Berlin, starting on Monday, the 19th of October, right here on Bloomberg Radio. I'm Caroline Hepke in London.

You can catch us every weekday morning for Bloomberg Daybreak here at beginning at 6am in London. That's 1am on Wall Street.

Nathan.

Thanks, Caroline. And coming up on Bloomberg Daybreak Weekend, we'll look ahead to the next monetary policy decision from the Bank of Korea. I'm Nathan Hager, and this is Bloomberg. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. The Bank of Korea is set to make its next interest rate decision in the week ahead.

And for a preview, here's Doug Krisner, host of the Bloomberg Daybreak Asia podcast.

Thanks, Nathan.

The Bank of Korea delivered back-to-back rate hikes in July and August, and it's possible that policymakers could pause to assess the lag effects of those rate increases. And you could make the case that the pause would further be warranted given signs of cooling inflation. At least that was the case in September. For a closer look, let's bring in Bloomberg's Kat Barton. Kat is our bureau chief in Seoul, and she joins me now. Thank you so much for being here. You know, it was interesting. I just referenced the latest inflation read. Both headline and core are still close to 3%. Is it a foregone conclusion that there is some tension here that may cause the BOK to actually raise rates?

It's not clear. For sure, the pace of inflation did stay firm in September. There's been some kind of persistent price pressures and it does support the case for the central bank to kind of keep this tightening bias, but it's not clear whether they're going to continue with that or they might take a breather next time. Last time we had the dot plot in August and 10 of those 21 dots were for 3.25, the largest cluster. So we don't have another dot plot until November. So for the next BOK meeting, the question is really whether, you know, whether what the Bank of Korea Governor Shin was saying or the dot plots were indicating will show that that kind of path still holds.

So we know that South Korea is a big fuel importer and price growth accelerated in the month of September. Gasoline, I think, and diesel each rising 12 and 20 percent respectively. So the energy part of the inflation story is huge, is it not?

That's right. South Korea is a huge energy importer. And obviously, it's been very tricky for them since conflict started in Iran. Prior to that, they were importing, I think, 70% of their imported oil was coming through the Straits of Hormuz. So they've really had to scramble to find workarounds and to find other ways to meet those needs. They have capped prices here. So it hasn't really fed through to consumers.

But for sure, it's feeding into this. And I think the Bank of Korea is certainly going to be mindful of that when they make their decision.

So when I think of the South Korean economy, it's obviously a story about memory chips, whether you're talking about Samsung or SK Hynix. And we have seen prices for those chips simply soar. I think recently, Samsung reported its earnings and the company recorded an operating income, an eightfold increase.

This is just stunning.

Nearly ninefold increase. It is stunning.

Stunning.

It was still absolutely stunning.

So how does that feed into the overall economy?

It's a really good question. Nearly ninefold rise in quarterly operating profits, although it was still just shy of the expectations, which were, of course, themselves very, very lofty. And it shows how much Samsung, of course, also SK, are profiting from this global AI infrastructure buildout. But it really has a big impact on South Korea because the government has been seeing that their tax revenue is expected to hit absolute fresh record on the global chips boom. It could be, really a record high in 2026, up nearly 30 percent from last year. Exports have been extending like really break net growth because again, it's all driven by these chips.

So it's feeding through into the broader economy. And obviously, that, again, is something that the Bank of Korea is very mindful of. We've talked before about how Samsung employees and SK employees are in line for these enormous performance-linked bonuses if their companies continue to meet these record kind of targets. So I think that hasn't started to hit yet, but it will be coming at the end of the year. And I think the Bank of Korea is very mindful about the impact on the broader economy and is keeping a very tight watch in terms of what they can do rates-wise.

Is there any concern that the economy is overly concentrated when it comes to semiconductors? And if there is some type of adjustment in the market, I'm not saying that that's imminent, but that that could really spell difficulty for the economy?

I think it's a really good question. More than half of the South Korea's index, the KOSPI, is Samsung and SK at this stage. The companies themselves are very optimistic that the demand, which is fueling these really high prices for memory, will continue for at least the next couple of years. The government is itself very bullish and has organized this enormous investment into building up South Korea's capacity to produce memory chips. They're talking about, you know, 800 plus billion investments into new fabs in the south of the country. Semiconductors are basically a national strategic asset, right?

They're trying to capitalize on this. and see how the country can position itself to really be one of the huge beneficiaries from the global AI boom.

So when it comes to fiscal policy, I hear the investment being made in semiconductor production infrastructure, but I'm wondering whether the government is doing anything additionally beyond that. Are there initiatives that the government is getting behind to try to maybe fortify other parts of the economy, the other parts of infrastructure in South Korea?

Well, one of the other huge things that they've been dealing with in the last few weeks is actually more in America than in South Korea, which is that they've just unveiled their latest, well, the first projects under this huge $ 350 billion trade deal that they agreed with the United States to head off additional tariffs from Donald Trump.

So some of those projects have recently been announced. And that is, I think, something that is also very much weighing on South Korean policymakers' minds because It's a country that's doing very well, but at the same time, $ 350 billion is a lot of money. And they need to make sure that these projects are commercially viable. They need to make sure that these projects are not going to tank the currency. And I think that is something that they are moving very cautiously with. But even so, the investments remain subject to conditions that Sol negotiated very hard for, including a commercial viability test. So for sure, that is something that they're very mindful of at the moment.

So we talked a moment ago about corporate profits, particularly for the chip makers, and how that's beginning to filter through in the economy in terms of higher wages and bonuses. How are consumers in South Korea feeling generally? And I'm wondering about the difference between what is happening in more urban centers relative to other parts of the country that I will call more rural.

South Korea is incredibly concentrated into Seoul and then the rest of the country. And one of the things that is top of mind for most South Korean consumers, especially in the capital, is the price of property. So Seoul property prices have just been increasing week after week after week, despite the government taking endless steps to try and cool the market, putting more and more restrictions on, for example, credit for mortgages. But despite all of this, the price of buying an apartment in Seoul really has just continued to rise. And the market as a result is quite stagnant.

It's not easy even for young people to find a way to get, you know, a foot on the property ladder. So that is something that the government is really struggling with. And it's certainly something that has weighed very much on President Lee Jam-yong's approval ratings. It's something that they have said they want to tackle. They had a big reshuffle of the president's administration recently, in part because they've set their huge priorities for the projects, you know, for building these semiconductors, for investments in that side of things. And now they want to refocus the administration on improving, tangibly improving the quality of life for South Koreans. And that means tackling things like property prices, tackling concerns about rising costs.

And that's something that is really now the main focus for Lee Jae-myung's administration.

I'm curious as to how foreign investors are feeling about investing in South Korea. I was reading some articles on the Bloomberg Terminal, actually, that were suggesting that we've seen a bit of outflow, particularly as it relates to the equity market. I mean, how are foreign investors feeling right now about the market that you're in?

I think there are bright spots in the market, which people are very interested in. I would say South Korean defense, for example, has still been doing okay. But for sure, with the AI investments with Samsung and SK, we've seen like a big shift towards Taiwan, for example, recently. People and foreign investors seem more excited about that. And I think South Korea is, in general, it's a bit of a tricky place. There was a recent case where Elliott Investment Management won more than 100 million in a long-running fight with South Korea over a kind of controversial merger of two Samsung groups. And it's an interesting case because it harks back to when South Korea was constantly criticized for the government being too cozy with the chaebol, with

these giant conglomerates. Now, they've taken steps, obviously, to improve that. One of Lee Jae-myung's big projects campaigns has been to improve corporate governance, to make things better for foreign investors. But for sure, it's still a concern and it's still something that I think does weigh on people's minds when they're thinking about whether to really put their money here.

One of the things that I recall being debated when the equity market was flying in South Korea was the degree to which people were applying leverage. And I'm wondering, just to get back to the Bank of Korea, because that's where we started the conversation, whether monetary authorities in Seoul are concerned about that. And I know that the BOK is not a market regulator, but they've got to be cognizant of the fact that when rates are kind of at lower levels on a relative basis, maybe there's a little bit more risk-taking or leverage that gets applied, and that could be maybe a little bit more risky than authorities would like to see.

Yeah, you're absolutely right with that. I think earlier this year, the authorities allowed single stock leveraged ETFs specifically for Samsung and SK Hynix, and it just precipitated this huge flow of cash into these products, these complicated products from retail investors, South Korean retail investors who really are notoriously risk loving.

So obviously, that's great when things are going up. But on the way down, it's amplifying your losses. And it's also amplifying volatility because obviously, there's a need for the kind of mechanical rebalancing every time there's a move on those products. So it definitely, a lot of the regulators spoke of regrets after approving those, having seen the kind of bout of market volatility that it set off. And I think it's definitely something that South Korea has taken action to try and rein in. They increased the requirements for people to invest in them. They imposed, for example, like training. We actually had one of our Bloomberg reporters here took the training that you have to do a one-week training before you're allowed to invest in new leveraged

ETF products. And they raised, for example, like the requirements in terms of capital before you can invest in those. So they've certainly taken steps to try and rein that in. But for sure, again, it's something that the Bank of Korea may be considering in their decision, because when they unleashed these leveraged three times leveraged single stock ETFs earlier this year, it really set off a tremendous bout of market volatility. So they will be definitely looking not to not to allow something like that to happen again.

Kat, it's always a delight. Thank you so very much for helping us understand what's been going on with the South Korean economy as we look ahead to the rate decision from the Bank of Korea. Bloomberg's Kat Barton, she is our Bureau Chief in Seoul. I'm Doug Krisner. You can join us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast.

Nathan?

Thanks, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas. and the news you need to start your day. I'm Nathan Hager. Stay with us. Top stories and global business headlines are coming up right now.

Daybreak Weekend: US Housing, Germany Summit, BOK Decision

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