BOK VIEW: BofAML continue to "expect the......>

KOREA: BOK VIEW: BofAML continue to "expect the BoK to keep the policy rate on

hold for the rest of the year as (1) policy focus seems skewed to the fiscal

side (larger government spending and potential supplementary budget in 2H19);

(2) slowing domestic economy at an expected pace; (3) muted inflation due to

supply side factors; and (4) sluggish labor market, which could call for a

supplementary budget. The BoK appears reluctant to consider any rate change

near-term. Rather, it is expected to take a side-step and watch how the fiscal

cushion mitigates risks against growth on the back of strong tax receipt from

2018. If the budget frontloading in 1H19 (61% of the W469.6tn budget) fails to

provide a robust buffer for consumption by 2Q19, we see a high possibility of

discussions on supplementary budget starting in 3Q19 and execution in 4Q19. Only

after exhausting the fiscal policy tool, will the BoK start discussing monetary

easing, in our view. We think starting such discussion will come no sooner than

4Q19 or early-2020."