Monday, March 31, 2008

South Korea Industrial Output February 2008

South Korea's industrial production unexpectedly fell for the second time in three months in February, indicating economic growth may be cooling. Output declined 0.2 percent from January, when it jumped 2.5 percent, the National Statistical Office said today in Gwacheon.

According to the National Statistical Office (NSO) Monday, although industrial output fell month on month it still grew by a healthy 10.1 percent year on year rate in February on increasing production of semiconductors and audio and visual equipment. This compared with an 11.3 percent year on year gain in January.

Service output also increased at a slower rate of 5.9 percent in February from a year ago, down from a 6.8 percent growth the previous month. The finance and insurance sector saw output increase by 15.4 percent, but those of entertainment and sports-related sectors and educational service businesses fell by 3.4 percent and 3.3percent, respectively.

Tuesday, March 11, 2008

How Far May the Won Fall in 2008?

South Korea's won may fall considerably in the first half of 2008 as global credit-market losses lead overseas funds to sell holdings in Korean stocks according to a report out this week from State Street Global Markets.

The 3.1 percent drop so far this month in the Won's value vis a vis the dollar make it the world's worst currently performing major-exchange rate. Many economists consider that the decline will continue if the current-account deficit widens and the funds from stock sales continues.

Overseas investors have sold more Korean shares than they bought nearly every day this year on concern slowing global economic growth will damp demand for exports. Korea's won and the Indian rupee are the only two of Asia's 10 most-traded currencies outside of Japan that have weakened versus the dollar in 2008.

Cross-over equity flows, or purchases of stocks by overseas investors, into South Korea are the second weakest among the 29 developed and emerging-markets economies tracked by State Street Global Markets, the world's largest institutional money manager, and Korea's stock index has slipped 14.1 percent so far this year.

Korea's currency fell 1 percent this morning to 974.45 per dollar as of 1:41 p.m. local time, and this was the biggest decline since last August with the won reaching its lowest level since March 2006.

Korea's current-account is expected to run a $7 billion deficit this year according to the finance ministry yesterday, a figure which is twice the central bank's $3 billion forecast. Growth will fall short of 5 percent in 2008 and an earlier estimate of 6 percent because of slowing shipments abroad, Finance Minister Kang Man Soo said last week.

Friday, March 7, 2008

South Korea Central Bank Keeps Interest Rates Unchanged March 2008

South Korea's central bank kept its interest-rate policy unchanged for a seventh month today, citing increasing inflation pressures and the deteriorating global economic outlook.

Governor Lee Seong Tae set the seven-day repurchase rate at 5 percent.
The yield on South Korea's five-year government bond rose 4 basis points to 5.09 percent, reversing an earlier decline.

The won traded at 957.50 per dollar at close of onshore trading in Seoul, little changed from before the decision and posting its biggest weekly loss in seven months. The main Kospi index of shares slumped 2 percent to 1,663.97.

Consumer prices rose 3.9 percent in January from a year earlier, the fastest pace in more than three years. Inflation slowed to 3.6 percent in February. The Bank of Korea in December forecast consumer prices to rise 3.3 percent this year.

Export growth accelerated in February, rising by 20.2 percent, and industrial output increased 2.5 percent in January from December. Expanding demand from China, the Middle East and other emerging markets helped protect Korea's exports from the slowdown in several industrialized economies.

Other figures suggest growth may have peaked after gross domestic product expanded at the fastest annual pace in almost two years in the fourth quarter. Corporate investment fell, inventories rose, and a leading index weakened for a second month, the March 4 production report also showed. The Kospi index has plunged 12 percent this year.

The central bank, which expects prices to moderate in the second half, aims to keep inflation between 2.5 percent and 3.5 percent, on average, for the three years to 2009.