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SOUTH KOREA: Korea Country Wrap: CPI Moderates Further on Energy and Food.

SOUTH KOREA
EM BulletBulletSouth KoreaAPACEmerging Market News
  • A moderation of inflation in February to 2% provides policy flexibility going forward to support growth.  Beginning their cutting cycle in October last year, the BOK has cut 75bps in total with the Governor clear that there could be more to come.  February’s CPI is a moderation from the month prior result of 2.2% and below BBG forecasts of 2.1%.  The decline in food prices will be welcome relief for consumers as housing costs continue to rise.  Core inflation was below consensus at +1.8% (cons +1.9%) with the m/m estimate falling also.   A sell off in bonds yesterday took back some of the cuts priced in and today’s CPI no doubt will give bond investors reasons to think as they contemplate whether just 36bps of cuts priced in for the next 12 months is sufficient. (source: MNI – Market News).
  • The Korean Government is set to provide US$17m in export vouchers to SME’s this year  (source: The Korea Times)
  • The news of a delay in tariffs on autos has spurred optimism in the region and the KOSPI has rallied +0.44% today.
  • KRW:  the won was very strong early , but gave back those gains to be up just +0.21% at 1,442.25
  • Bonds:  another big sell off today with bond markets taking out some of the expected cuts priced in.  KTB 10YR 2.82% (+4bp)
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  • A moderation of inflation in February to 2% provides policy flexibility going forward to support growth.  Beginning their cutting cycle in October last year, the BOK has cut 75bps in total with the Governor clear that there could be more to come.  February’s CPI is a moderation from the month prior result of 2.2% and below BBG forecasts of 2.1%.  The decline in food prices will be welcome relief for consumers as housing costs continue to rise.  Core inflation was below consensus at +1.8% (cons +1.9%) with the m/m estimate falling also.   A sell off in bonds yesterday took back some of the cuts priced in and today’s CPI no doubt will give bond investors reasons to think as they contemplate whether just 36bps of cuts priced in for the next 12 months is sufficient. (source: MNI – Market News).
  • The Korean Government is set to provide US$17m in export vouchers to SME’s this year  (source: The Korea Times)
  • The news of a delay in tariffs on autos has spurred optimism in the region and the KOSPI has rallied +0.44% today.
  • KRW:  the won was very strong early , but gave back those gains to be up just +0.21% at 1,442.25
  • Bonds:  another big sell off today with bond markets taking out some of the expected cuts priced in.  KTB 10YR 2.82% (+4bp)