VIEW: ING note that "even though........>

SOUTH KOREA: VIEW: ING note that "even though conventional monetary policy may

have reached its limits, it was not clear that the BoK was gearing up for a

substantial move towards Quantitative Easing. It appears that the BoK has

already bought some Korean Treasury bonds in the secondary market, though it is

less clear if this was through an expansion of the balance sheet and printed

money which would put it into QE territory, or not. In either case, it looks

more like a market-smoothing operation than a concerted attempt to drive yields

lower. Governor Lee said the BoK remained ready to buy bonds. But rather than

pushing a QE interpretation, it again sounds as if this would be a conditional

move in response to market volatility, and there were various remarks about herd

market behaviour and one-sided market moves to support this view. So although

the BoK is still saying that it remains "ready to buy bonds", we don't think

this is under the context of an imminent QE programme, more of an ad hoc

adjustment in case of market volatility. A more reasonable interpretation is

that the BoK is now taking a back seat to the government and anticipating a more

forceful fiscal response to provide the bulk of ongoing support."