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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
SOUTH KOREA
The market expects South Korean export growth to be -2.1% y/y for October, with this data due early tomorrow. If realized this would be the weakest print since October 2020. Arguably the Korean won is already priced for such a move, see the first chart below.
- The won looks to have sold off too much relative to slowing export growth this past year, but the negative trade position is likely partly responsible for this wedge.
- In any case the directional correlation between the two series is still fairly strong. It is difficult to argue for a very strong turnaround in won sentiment amidst a slowing export growth backdrop.
- The other areas of focus will be tech export momentum, and export growth to China, which fell -16.3% y/y in the first 20 days of October.
Fig 1: South Korean Export Growth & KRW/USD Y/Y
Source: MNI - Market News/Bloomberg
- There may be more relief for the won from a trade balance standpoint. The second chart below overlays the trade position against the Citi terms of trade proxy. The proxy has been on the improve amid lower commodity prices and suggests further improvement in the trade position.
- The trade deficit has improved noticeably from the lows, with the market forecasting the October deficit at -$3.5bn, versus -$3.8bn last month. The country is reportedly quite advanced in meeting stock levels for LNG ahead of the upcoming winter period as well (see this link for more details).
- Still, it may require a decent upside surprise to offset the expected dip in export growth from a KRW FX sentiment standpoint.
Fig 2: South Korean Trade Balance & Citi Terms Of Trade
Source: Citi/MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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