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South Korea 'Barometer' Sees Further Deterioration in Economic Data, Earnings

GLOBAL
  • Geopolitical uncertainty combined with hawkish response to US CPI print have been supporting the Dollar broadly, with DXY Index surging above the 109 level on Thursday before edging lower.
  • USDKRW broke above the 1,300 level last week and has been trading at its highest level since April 2009 lately.
  • We previously saw that South Korean market and economic data could be used as a good proxy of the current state of the economic activity.
  • The chart below shows that an extremely weak KRW has been associated with global PMI falling significantly below the 50-line thresholds, increasing the odds of a global recession.

  • Economic data showed earlier this month that momentum on South Korea exports continues to fade as China slowdown combined with the surge in recession fears globally (particularly in Europe) have been weighing on the global economic activity.
  • Macro analysts have historically used South Korea exports as one of the key input when computing a global leading economic indicator.
  • The chart below shows that SK exports have strongly led equities EPS by 3 months in the past two decades, therefore further deceleration in exports and global trade could continue to weigh on risky assets in the near to medium term.

Source: Bloomberg/MNI.

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