South
Korea To Weigh Second Straight Cut Against Signaling Panic
The
Bank of Korea is set to consider cutting rates for a second straight
month, weighing the need to prop up a deteriorating economy against
the risk of signaling panic to markets.
8
August, 2012
Ten
of 16 economists surveyed by Bloomberg News predict Governor Kim
Choong Soo will keep the seven-day repurchase rate at 3 percent
tomorrow. The rest expect a quarter percentage point cut to 2.75
percent, which would be the first consecutive reduction in more than
three years.
The
BOK faces increasing pressure to act after exports fell the most
since 2009 on Europe’s debt turmoil and inflation eased to a
12-year low. While Kim said last month that the economy is losing
steam faster than expected, policy makers may wait to see more data
before cutting rates again, according to economist Wai Ho Leong.
“Dropping
rates back-to-back after a long period of holding rates might convey
an undesired sense of panic in the market,” said Leong, a senior
regional economist at Barclays Plc in Singapore. Policy makers may
“prefer to deliver easing in a more calibrated fashion, conditional
on data releases,” Leong said.
Indonesia
also decides monetary policy tomorrow and will probably keep interest
rates unchanged for a sixth month, according to 25 of 26 economists
in a Bloomberg survey. The Bank of Japan (8301) may refrain from
adding monetary stimulus for a fourth time, according to all 22
economists polled. The State Bank of Pakistan is scheduled to decide
on borrowing costs on Aug. 10.
“For
Asia as a whole, we won’t see rampant rate cuts,” said Sanjay
Mathur, Singapore-based head of research and strategy for non-Japan
Asia at Royal Bank of Scotland Group Plc. “The economic environment
is not dire enough to say we need to cut rates aggressively.”
Australia
Unchanged
Australia’s
central bank kept interest rates unchanged at a developed-world high
yesterday, citing a domestic expansion that’s weathering a global
slowdown. A U.S. government report last week showing the economy
added more jobs than forecast in July damped speculation the Federal
Reserve will resort to a third round of asset purchases.
“We
expect the BOK to keep rates unchanged at 3 percent at its August 9
meeting following the surprise 25 basis-point cut in July,” said
Kwon Young Sun, a Hong Kong-based economist at Nomura Holdings Inc.
“The BOK also may want to keep its powder dry” until the Fed or
European Central Bank eases.
The
Fed said Aug. 1 after a policy meeting it “will provide additional
accommodation as needed” to spur growth and employment.
Weaker
Won
The
benchmark Kospi (KOSPI) share index and the won were little changed
yesterday. The won has fallen about 5.4 percent over the past 12
months, one of Asia’s worst performers, helping to offset export
declines at South Korea’s largest companies.
Hyundai
Motor Co. (005380), South Korea’s largest automaker, reported
second-quarter profit that beat analysts’ estimates as sales of the
Tucson sport-utility vehicle helped the company buck an industrywide
drop in Europe.
Still,
South Korea will probably fail to meet the BOK’s 3 percent growth
forecast for this year, said Ma Tieying, an economist with DBS Group
Holdings Ltd. in Singapore, who is predicting a cut to 2.75 percent
tomorrow. BOK Governor Kim said July 25 that the nation may fail to
meet the 3 percent estimate, while Finance Minister Bahk Jae Wan said
yesterday he’s still hoping to achieve such an expansion.
“If
the BOK doesn’t change rates this week, it will likely move in
September,” Ma said. “The faster-than-expected slowdown in
economic growth puts pressure on the BOK to add stimulus.”
$1bn
wiped off HTC market cap
8
August, 2012
47
institutional investors have completely sold down their stock in the
Taiwanese smartphone maker since February.
More
than $1 billion was wiped out of HTC Corp.'s market capitalization
Monday and Tuesday combined, after the Taiwanese smartphone maker
warned of weaker third-quarter earnings and reported a 45% plunge in
July revenue, highlighting the intense competition in the
fast-growing smartphone market where Apple Inc. and Samsung
Electronics Co. have a lead.
Shares
of HTC, an early adopter of Google Inc.'s Android operating system,
fell by their daily 7% limit Tuesday and ended at NT$240.50,
extending Monday's 6.9% decline. So far this year, HTC shares have
fallen more than 50%.
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