The Korea Herald

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Seoul stocks may be affected by BOK’s rate decision

By Kim Yon-se

Published : July 8, 2012 - 18:22

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South Korean stocks will be influenced by the upcoming Bank of Korea meeting that sets the country’s key interest rate, and other domestic and overseas economic developments, local analysts said Saturday.

The country’s key stock index, the KOSPI, closed at 1,858.2 on Friday, a gain of 0.8 percent from the week before.

The modest gain came about after leaders at the European Union summit agreed on a plan to alleviate financial market jitters, and both the United States and China announced new stimulus measures to deal with their slowdown in growth.

Despite such positive news, the bourse was weighed down by concerns over China’s economy, and worse-than-expected manufacturing and employment numbers in the United States.

“Next week’s stock market will be swayed by whether or not the central bank adjusts its key rate, which has remained fixed for 12 straight months,” a local market watcher said. In June, the country froze the benchmark 7-day repo rate at 3.25 percent.

China and the European Union had recently lowered rates as part of an effort to fuel growth, which could put some pressure on policymakers at the BOK’s Monetary Policy Committee, although high inflation expectations may cause policymakers to be cautious.

Others said earnings reports for domestic companies in the second quarter could move the market, along with the effects of economic stimulus measures being pursued by large economies around the world.

Han Chi-hwan, an analyst at Daewoo Securities, said due in part to the decision by Beijing to lower its key rate, investors may pay more attention to steel and chemical shares. China is the largest importer of South Korean products. 

(Yonhap News)