Some Light At the End Of Export Tunnel

South Korea's August trade figures were better than expected. Exports fell -8.4%y/y, versus -11.8% forecast and -16.4% prior. Imports were -22.8%y/y, versus -23.4% forecast and -25.4% prior. This left the trade position in a surplus of $870mn, against expectations of a -$560mn deficit. The prior month's surplus was $1652mn.

• The export trend appears to be improving modestly, with the 3 month MA of y/y growth at -10% versus a trough at the start of the year near -13.5%. Car exports are a bright spot, +29%, while ship exports rose 35%.
• Offsets remain from the chip sector, -21%y/y, although this is above recent trough points. It suggests the worst of the y/y downside momentum may be behind us, see the chart below. Petroleum exports were also down 35% y/y.
• Exports to China fell 20% y/y, only slightly above the July pace of -25.1%.
• Note as well the August PMI eased back to 48.9 from 49.4 in July.

Fig 1: South Korea Chip Exports & Global Semiconductor Sales Y/Y

Source: MNI - Market News/Bloomberg

• The trend on the trade balance continues to improve, see the chart below. However, the improvement in the Citi terms of trade proxy has halted, in line with the rebound in global commodity prices, particularly in the energy space.

Fig 2: South Korean Trade Balance Citi Korea ToT Proxy

Source: Citi/MNI - Market News/Bloomberg