Focus on Whether Minority Opinion Raises 'Growth Concerns'
Presenting Next Year's Growth Rate Forecast Is Also Important
Lee Chang-yong, Governor of the Bank of Korea, is attending the Monetary Policy Committee meeting held at the Bank of Korea headquarters in Jung-gu, Seoul on the 22nd. Photo by Joint Press Corps
Hana Securities expects the Bank of Korea's Monetary Policy Committee (MPC) to keep the base interest rate unchanged at its meeting on the 28th of November.
Researcher Kim Sang-hoon of Hana Securities stated, "We anticipate a decision to maintain the base rate, with one dissenting opinion likely to be voiced, raising growth concerns during the policy communication."
Kim analyzed, "If forward guidance hints at a rate cut in January next year, the growth rate for next year will be presented as 1.9% or rounded to 2.0% based on the second decimal place."
Since last week, the market has been preemptively pricing in the possibility of both a rate hold and a 'surprise cut.' Kim pointed out, "If the 'surprise cut' does not materialize, some profit-taking may occur."
Kim predicted, "Although the 3-year government bond yield has not yet reached the appropriate lower average level of 2.63% suggested for a 100bp cut, if the rate is held steady in November, the base rate is unlikely to reach 2.50% until at least the second quarter of next year, indicating a pause."
However, he observed that even if profit-taking occurs, it is unlikely to significantly exceed 2.85%, based on the judgment that local institutions, which have not increased their holdings, will buy at that level.
Furthermore, Kim added, "We set the first lower bounds for the 3-year and 10-year government bonds at 2.6% and 2.8%, respectively, and recommend using any profit-taking sales after the MPC meeting as buying opportunities."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
