Sell-Side Views On South Korean Trade

Sell-side views on South Korea's weaker than expected trade data from the weekend. Weakness was evident outside of tech.

Goldman Sachs: "Korea's exports stayed almost flat in May after gaining 7.6% mom sa the previous month. The outcome was below consensus and our expectations. Tech exports rose at an accelerated pace of 4.2%, but the gains were broadly offset by a pullback in all other exports. By destination, exports to the US pulled back from record high levels in April, offsetting modest gains in exports to major destinations and falling slightly below Korea’s exports to China. Imports contracted 1.4%, and the trade surplus rose to US$5.0bn from US$1.5bn the previous month, reaching the highest level since December 2020."

J.P. Morgan: "Korea’s nominal customs exports fell 1.1%m/m, sa, in May after a 4.3% gain in April, as a disappointment to the flash 20-day series’ gain by 1.9%. The three-month trend growth marked 2.7%3m/3m, saar, to modestly recover after 0.8% contraction in March, and the 2Q exports growth is expected to turn up modestly after 1Q’s contraction.

In the details, non-tech exports fell to offset the gain in tech exports. Non-tech exports fell 3.5%m/m, sa, in May after a 4.7% gain in April, as machinery (-4.5%), petrochemical (-4.5%), and automobile (-2.5%) exports broadly fell. The non-tech exports’ three-month trend nominal growth remained sluggish at -3.9%3m/3m, saar, likely with a negative price effect, as the non-tech exports volume index held up by April to 1.6%3m/3m, saar. Meanwhile, tech exports rose 4.7%m/m, sa, in May on top of 3.5% gain in April, as semiconductor (2.5%) and mobile device (14.8%) exports rose. The three-month trend growth of tech exports remained strong at 20.4%3m/3m, saar. We have noted from April IP reports that the tech (notably memory chip) sector should lead the overall manufacturing sector growth in 2024, and May customs trade data is in line with our long-standing view.