Further Bank of Korea tightening only a matter of time

The Bank of Korea (BoK) held its policy rate at 2.5% today, as expected. Nonetheless, the economy should regain momentum during the course of next year while inflation is likely to trend higher. The upshot is that we continue to expect further monetary tightening in 2011, with the next hike coming in January or February. Accordingly, we forecast that the won will rise by more than other regional currencies next year while KOSPI stocks, given current low valuations, should outperform as well.