Bank of Korea fixed its policy rate

Short comment

With several difficulties, BOK didn't raise its benchmark rate, 7days repo, unlike expected. Except US, every region got sluggish indices for real economic situation. I believe that BOK will not raise the benchmark rate in near future with sluggish indices in every region except US. The institution lowered its expected GDP Growth for this year to 2.7% from 2.9%.

Unlike BOK, Fed is raising Federal Funds Rate, targetting 3%. The gap of market yields could lead to outflow of foreigners from Korean FI market like local analysts are concerning. The outflow didn't give plunge to the market, however, because liqudities among domestic institutions are full. BOK sending message continuously that we don't want pressure to the liquidities. Besides, Korean Government bonds are considered to be one of the safest fixed income securities with German Bund with the country's foreign reserves and healthy manufacturing industries.

I also believe that fixing benchmark rate is appropriate decision to give additional catalyst to regional stock market. While it's bad-news for commercial banks which are struggling with the low market yields and 32bp of 3y-10y spread, it is another reason why the stock market could show upside movement during the rest of the year.

Except Fed and BOE, all other central banks in the world are still in the easing stance.