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Bank of Korea Monetary Policy Is Expected to Remain Stable

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Bank of Korea’s monetary policy

The Bank of Korea maintained its interest rates at record lows of 1.5% in its December meeting. Even as exports continue to decline, the central bank felt the eased policy stance would assist economic growth momentum. The next meeting is scheduled for January 14, 2016, when the bank will announce its interest rate decision.

An increase in domestic demand and an increase in the GDP (gross domestic product) by 1.3% in the quarter ended September 2015 are expected to reduce pressure on the central bank to further reduce the benchmark rates.

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Response from around the world

NATO’s (North Atlantic Treaty Organization) Secretary General Jens Stoltenberg has condemned North Korea’s bomb test. He called it a clear breach of UN Security Council resolutions. China, an ally of North Korea, also condemned the reported test and urged the country to refrain from increasing tensions in the Korean peninsula.

A South Korean spy agency has stated that the seismic waves produced by the explosion were lower than normal, thus raising questions about whether it was indeed a hydrogen bomb test.

Impact on the market

Looking at ETFs for January 6, 2016, the Deutsche X-trackers MSCI South Korea Hedged Equity (DBKO) fell 1.4%, tracking the Korean won. The iShares MSCI All Country Asia ex Japan ETF (AAXJ) was trading negative by 1.6%.

South Korean ADRs (American depositary receipts) were trading on a negative note. Shinhan Financial Group (SHG) fell 0.71%, while Woori Bank (WF) fell 0.51%. POSCO (PKX) ended on a lower note at 1.9%.

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