The Bank of Korea Just Delivered a Surprise


Jun. 10 2016, Published 3:11 p.m. ET

EWY falls on rate cut by the Bank of Korea

South Korea’s iShares MSCI South Korea Capped ETF (EWY) slid on June 9 after the Bank of Korea cut interest rates by 25 basis points to 1.25%. This is a record low for the Korean policy rate, which is aiming to support the government’s plan for massive debt restructuring for highly indebted firms.

Growing risks to the economy due to slow trade recovery worldwide also drove the dovish move. EWY had risen by more than 6.5% since the beginning of the month, leading to some profit booking by traders.

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Chinese inflation falls

Meanwhile, consumer price inflation across China rose by 2.0% in May on an annual basis against expectations of a 2.3% rise. Prices contracted by 0.5% in May, as compared to expectations of a 0.2% decline. Chinese ETFs (FXI) (MCHI) and (ASHR) were declining on June 9, prior to closing on account of the local holiday.

Japanese indexes continue to correct

The Japanese Nikkei 225 corrected by nearly 1% on June 9, 2016, after machinery orders added further disappointment to the Japanese economy. Machinery orders fell by 8.2% on a year-over-year basis in April, as compared to forecasts a 2% decline.

Relatedly, the unemployment rate in the Philippines rose in the second quarter to 6.1%, despite the 5.8% rate last quarter. Thai (THD) consumer confidence in May came in marginally lower at 72.6, while retail sales in Indonesia came in slightly below estimates of 11.1% at 10.4%.


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