Standard Chartered notes:
- We revise lower our 3M certificate deposit and 1Y monetary stabilisation bond (MSB) forecasts, as we now expect a policy rate cut in June and a gradual hike in rates towards 2017.
- We expect the MSB yield to reach 1.60% by 2015 and 2.25% by 2016. Expectations for a further rate cut at the Bank of Korea (BoK) Monetary Policy Committee meeting next week (11 June) have risen with recent economic data deterioration - weak April industrial production, May trade and CPI inflation - and the Middle East Respiratory Syndrome virus outbreak.
- We think the recovery in domestic demand and the services sector, particularly tourism, could be negatively impacted by the virus outbreak.
- We think the BoK will consider this new downside risk to domestic consumption and cut the rate to 1.50%.
