Sovereign Debt Plus AI Bonds: "Next Shock Will Hit Advanced Economies"

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and delivers six news items tailored to each reader type.

1. Talk of September Turmoil in Advanced-Economy Bonds — Is Korea Prepared?

- Key summary: International finance experts are pointing to the debt problem in advanced economies as the detonator of the next financial crisis. Anoop Singh, former director of the International Monetary Fund's Asia and Pacific Department, warned that the next major financial shock is likely to originate in advanced-economy sovereign bond markets. In the United States, the fiscal deficit ratio worsened to 5.7% in the second quarter from 5.2% in the first, and the 30-year government bond yield returned to an upward path after hitting its highest level in 19 years, since 2007. Bank of America (BofA) projected that U.S. investment-grade corporate bond issuance would reach a record $2.1 trillion this year on rising bond sales to fund AI investment, and observers say Korea, with its high dependence on external conditions, also needs to prepare for outside turmoil.

2. Warsh Reveals His Hawkish Colors — Will He Stand Up to Trump's Pressure for Rate Cuts?

- Key summary: Fed Chairman Kevin Warsh said in his keynote speech at the Jackson Hole meeting that the central bank would do its job if underlying inflation does not move sufficiently toward the 2% target, putting to the test whether he will act at next month's FOMC meeting. In the bond market on the 28th, the two-year yield, which is sensitive to monetary policy, jumped to as high as 4.35% during the session, its highest in a month, while the 10-year yield rose to 4.72% and the dollar index (DXY) gained 0.55% to 99.7. Kenneth Rogoff, a professor at Harvard University, noted that changing interest rates before an election is always difficult. Meanwhile, U.S. Treasury Secretary Scott Bessent has rolled out measures in succession — buying yen and expanding Treasury buybacks — to prevent a surge in long-term bond yields.

3. Will Samsung Electronics and hynix Pay 100 Trillion Won a Year in Corporate Tax Alone?

- Key summary: According to the Financial Supervisory Service, corporate tax payments in the first half of this year came to 3.9876 trillion won at Samsung Electronics and 7.2207 trillion won at SK hynix, for a combined 11.2083 trillion won. That is a 167% surge from 4.1906 trillion won in the first half of last year and the second-largest figure on record, after the first half of 2019, which reflected an earlier semiconductor boom. First-half operating profit stood at about 146.7 trillion won for Samsung Electronics and 98.2 trillion won for SK hynix, while brokerage consensus estimates put full-year operating profit at 385 trillion won and 266 trillion won, respectively. Assuming combined operating profit of 500 trillion to 600 trillion won on a separate basis and applying an effective tax rate of 20%, annual payments would exceed 100 trillion won, though the actual amount could be lower depending on tax credits for facility investment and research and development (R&D).

4. Korea Zinc (010130) Control Fight in Its Second Year at a Standstill — Another Clash at September 9 Extraordinary Shareholders Meeting

- Key summary: Two years after Young Poong (000670) and private equity firm MBK Partners declared a hostile merger and acquisition (M&A) bid for Korea Zinc, the legal battles and boardroom contest between the two sides remain at a standstill. Some 30 lawsuits and injunction requests have been filed so far, and the decisive contest at the extraordinary shareholders meeting on the 9th of next month will be a single audit committee seat filled through separate election. The combined 3% rule, which recognizes only 3% of the voting rights of the largest shareholder and related parties, neutralizes the roughly 41% stake advantage held by Young Poong and MBK. In October, conditions will be met for a call option allowing MBK to buy about 12% of the shares held by Young Poong, and exercising it would make MBK the single largest shareholder. Despite the war of attrition, Korea Zinc posted record half-year results, with consolidated revenue of 12.4446 trillion won and operating profit of 1.3332 trillion won.

5. Big Tech Firms Ask to "Make It in the U.S." — First Overseas Production Base in 15 Years

- Key summary: LG Electronics (066570) is pursuing local investment of up to several hundred billion won to build a second chiller production base in Virginia, comparable in scale to its Pyeongtaek plant. The financial investment industry sees a strong likelihood that LG Electronics will sign a 2.5 trillion won contract to supply AI data center cooling solutions to a global big tech company in October this year, four times the 600 billion won in related orders won in the first half. Big tech clients are said to have strongly demanded the establishment of a North American production network during contract negotiations to secure stable equipment supply. A single 1 gigawatt-class AI data center typically requires about 60 large chillers of the 5,000-refrigeration-ton class, and the local industry projects that new data center capacity worldwide will grow to 70 GW in 2031 from 25 GW this year, with roughly 60% of that concentrated in North America.

6. Koo Kwang-mo's "Selection and Focus" Bears Fruit — HVAC and Auto Parts Earnings Soar

- Key summary: LG (003550) Group's strategy of shifting from consumer-focused (B2C) businesses to high-value business-to-business (B2B) areas such as heating, ventilation and air conditioning (HVAC), vehicle solutions (VS) and robotics is showing up in earnings, with LG Electronics posting consolidated revenue of 23.8297 trillion won and operating profit of 1.5788 trillion won in the second quarter, its best second-quarter performance on record. Cumulative first-half operating profit has already exceeded last year's full-year figure, and last month the company became the first Korean firm to receive Nvidia quality certification for 600-kilowatt-class liquid coolant distribution units (CDUs) for data centers. Chairman Koo Kwang-mo visited Nvidia's headquarters in Santa Clara, California, on the 13th to discuss joint development of humanoid robots with Chief Executive Officer Jensen Huang. LG Energy Solution (373220) and LG CNS (064400) are also expected to post top-line growth in the third quarter, indicating that One LG synergy is getting on track.