Bank of Korea reports KOSPI surge and loan contraction in December
The Bank of Korea reported mixed financial market trends in December 2025, with the KOSPI reaching a new all-time high amidst declining bank lending to households and corporations.
KOSPI's record run and bond yield shifts
Treasury bond yields initially rose in December due to changes in domestic and overseas monetary policy expectations.
This increase then slowed as yields were perceived to have peaked in the short term, prompting institutional investors to resume investment at the start of the new year.
Concurrently, the KOSPI stock index rose sharply, driven by the strong performance of the semiconductor sector and anticipation of improvements in the capital market system.
This surge propelled the KOSPI to a new all-time high of 4,692.6 on January 13, 2026. Major short-term market interest rates also climbed before retreating as institutional investors redeployed funds.
Shifting tides in lending and deposits
Bank lending to households shifted to a decrease in December, falling by 2.2 trillion won after an increase of 2.1 trillion won in November 2025. This decline was influenced by weaker demand for jeonse deposit loans and tighter year-end loan management by banks.
Similarly, corporate sector lending also turned to a decrease, falling by 8.3 trillion won from an increase of 6.2 trillion won in the prior month, primarily due to year-end seasonal factors and temporary repayments for financial ratio management.
Corporate bonds and short-term commercial papers also saw net redemptions, while fund-raising through the stock market expanded.
End-of-year rebalancing
The shifts in lending and deposits largely reflect typical year-end financial ratio management and temporary fund movements, not a fundamental change in economic sentiment.
While the KOSPI's notable strength indicates robust sector-specific performance, the broader financial market exhibits signs of cautious rebalancing.
This suggests financial institutions are adopting a prudent approach as they conclude the fiscal year.
Source: Financial Market Trends in December 2025
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