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Korea: BOK set to turn dovish - Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 15, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Young Sun Kwon, Research Analyst at Nomura, suggests that as of today, all 13 economists (including Nomura) surveyed by Bloomberg expect the BOK to stay on hold at 1.50% tomorrow.

    Key Quotes

    “The Nomura BOK Signal Index – NBSI (Bloomberg ticker: NMEIBSI and NMEIBSIP) – offers the highest probability of a cut (NBSI+: -0.19 for February) since July 2015 (-0.11). The NBSI is drawn from a real-time ordered probit model that estimates the probability of a BOK rate cut, or hike, at each monthly meeting. The higher probability of a rate cut is due to a weaker global manufacturing index, lower stock prices and lower inflation, which more than offset a weaker KRW.

    Nomura’s Korea Trade-Weighted Nominal Policy Rate [Bloomberg ticker: NMEIKNPR] – the average of each trading partner countries’ nominal policy rates weighted by their respective market share for Korean exports – stood at 1.46%, lower than the BOK’s 1.50% policy rate.

    We believe that the BOK would prefer to wait until financial market volatility, which is uncomfortably high, subsides. However, given deteriorating macro data, we assign a 40% probability to a rate cut tomorrow and a 60% probability to a cut thereafter. As such, we would not be surprised if one or two MPC members dissented with their votes.”
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