[Park Joong-hyun Column] Liquidity overflows with semiconductor boom... Must prevent real estate reflux

South Korea's stock market, the KOSPI, is experiencing a dramatic ascent, seemingly defying gravity and global interest rate hikes. This upward trend is likened to the song 'Defying Gravity' from the musical 'Wicked,' where the character Elphaba flies for the first time. The market's performance is occurring despite predictions that rising interest rates would pull down asset prices, echoing Warren Buffett's sentiment that "interest rates are like gravity on asset prices."

The current boom is largely fueled by the semiconductor industry's dramatic success during the artificial intelligence (AI) transition. This, combined with a powerful "fear of missing out" (FOMO) psychology, is driving investors to push stock prices higher, overriding concerns about rising interest rates. Everyone wants to participate in the market's gains.

However, inflation signals from major economies are becoming increasingly clear, suggesting that interest rate hikes may be necessary. Even Kevin Wash, the U.S. Federal Reserve chairman, who was appointed with a "special mission" to lower interest rates, finds himself in a situation where rate hikes might be unavoidable within the year. U.S. consumer prices rose 3.8% year-on-year in April, the highest since May 2023, indicating persistent inflationary pressures.

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Interest rates are like gravity on asset prices