BOK's 25 bps cut to be last in the cycle

South Korea's PM Hwang declared a "de facto end" to the outbreak of the Middle East Respiratory Virus (MERS). The outbreak had prompted sharp KRW selling in June on concerns it would exacerbate the downtrend in exports and prompt a slide in consumer confidence.

"The BoK's Monetary Policy Committee lowered the Base Rate by 25bps, from 1.75% to 1.50% in June. This should be the last in the cycle. With inflation basing, the supplementary budget (KRW12trn, 0.8% of GDP) to counter the economic fallout from the MERS outbreak and sharp decline in the KRW REER is enough to keep BoK on hold through the rest of 2015", says RBC capital markets. 

The August Business Survey showed a recovery in confidence. Manufacturing confidence rose from a 3.5-year low of 67 to 70, while nonmanufacturing confidence also increased from an 11- month low of 66 to 71.