Korea's Won and Bonds Defy Global Trends

South Korea's won and government bonds have defied global trends in the second half of the year, gaining ground despite the US dollar's appreciation against other currencies. The KOSPI and chip stocks dominated the first half, but now it's the Korean won and bonds that are attracting capital and attention.

The divergence from US markets is partly due to short-covering in bonds and expectations of corporate dollar conversions supporting the won. However, these forces may be temporary, raising questions about whether this strength can last.

Korea's 10-year government bond yield rose only 2.0 basis points over the same period as the US Treasury yield increased by 15.1 basis points. The won appreciated nearly three times as much against the dollar as the yen did.