SC Global Head "Bank of Korea to Cut Interest Rate Once This Year"

Eric Robertson Exclusive Interview in Korea
US Fed May Cut Interest Rates Next Year
China Also Expected to Maintain Low Interest Rate Policy
"Korean Investors Are Dynamic and Optimistic
Reduce Developed Market Stocks and Increase Bonds This Year"

Eric Robertson, Global Head of Macro Strategy and FXRC (Foreign Exchange, Interest Rates, Commodities) Research at Standard Chartered (SC) Group, is answering interview questions on the 17th at the SC First Bank headquarters in Jongno-gu, Seoul. Photo by SC First Bank

[Asia Economy Reporter Kim Min-young] “I expect the Bank of Korea to cut its base interest rate once this year.”

Eric Robertson, Global Head of Global Macro Strategy and FXRC (Foreign Exchange, Interest Rates, Commodities) Research at Standard Chartered (SC) Group, stated in an exclusive interview with Asia Economy on the 17th, “I expect the U.S. Federal Reserve (FED) to cut rates next year, and China will also maintain a low interest rate policy.”

Meeting at the SC First Bank headquarters in Jongno-gu, Seoul, Eric Robertson said, “The good news this year is that the global economy is stabilizing. The Korean economy has also entered a stabilization phase, but I believe this optimism will somewhat weaken in the second half of the year, so the Bank of Korea will likely cut rates once in the first half.”

On the morning of the interview, the Bank of Korea announced it would keep the base rate at 1.25%. Two members of the Monetary Policy Committee expressed minority opinions favoring a rate cut, increasing the likelihood of a rate reduction within the year.

Eric Robertson visited Korea to attend the ‘2020 Global Research Briefing’ hosted by SC First Bank for corporate clients. He is responsible for developing and executing major asset investment and trading strategies within the group. After earning a degree in economics from Princeton University, he worked at Deutsche Bank in Germany and Millennium Capital Partners in London, UK, before joining SC Group in 2014.

This is his seventh visit to Korea. He feels that the Korean economy and Korean investors are dynamic and very interested in events happening worldwide. “This time, I noticed increased optimism among investors,” he said, adding, “Especially on a global scale, perceptions of investment have improved compared to six months or a year ago.” He continued, “Although Korean investors remain somewhat conservative, their risk-seeking tendencies have slightly increased.”

Regarding the strong performance of developed country stock markets last year, he offered a unique perspective. He said, “The U.S. stock market was driven by share buybacks from about the top 10 companies such as Apple, Facebook, and Google,” analyzing, “Last year alone, $800 billion was spent on share buybacks, and over the past two years, the total reached $1.5 trillion.”

On the reasons for the Korean market’s underperformance, he stated, “I do not agree with the view that it was due to the U.S.-China trade war,” and diagnosed, “The memory chip semiconductor market peaked in 2018 and then declined, and during this period, the Korean won weakened, which negatively affected the Korean stock market.” He added, “The performance of semiconductor companies is improving, and this year the economy is shifting toward stabilization.”

For this year’s investment strategy, Eric Robertson suggested reducing the proportion of developed country stocks and increasing bond holdings. He said, “I maintain the view that the global economy is stabilizing, but this is a somewhat conservative perspective rather than optimistic,” and predicted, “Economic growth rates in the U.S. and China are expected to be worse next year than this year, which will weaken market ‘trust and confidence.’” He also said, “Since there is no inflation globally, it is necessary to reduce stock holdings and increase bonds. Preferred assets would be U.S. Treasury bonds and bonds from Southeast Asian countries such as Indonesia, Malaysia, Singapore, and Thailand, where investment opportunities should be sought.”