From Bloomberg today:
South Korea's Economy Expands 1.8 Percent on Exports
South Korea's economy expanded at the fastest pace in almost four years in the second quarter, helped by rising exports, according to revised figures released today.
The economy grew 1.8 percent, the quickest since the fourth quarter of 2003 and more than the initial estimate of 1.7 percent, the Bank of Korea said in Seoul. From a year ago, the expansion was 5 percent, up from July's estimate of 4.9 percent.
Rising overseas demand helped the country sustain the longest stretch of growth in a decade. Overseas shipments account for two-fifths of gross domestic product and orders from South Korea's biggest market, China, have more than compensated for a slowdown in the U.S.
``Growth is likely to remain resilient amid healthy exports and a pickup in domestic demand,'' Go You Sun, an economist at Daewoo Securities Co. in Seoul, said before the report was released. ``The economy will perform well through next year.''
Exports grew at the fastest pace in six months in July, a previous report showed. China's economy expanded 11.9 percent in the second quarter, the fastest pace in more than 12 years.
South Korea shows few signs of being affected by the fallout from the U.S. housing recession, Vice Finance Minister Kim Seok Dong said Aug. 30. Moody's Investors Service last month raised the nation's debt rating to A2, the sixth-highest investment grade.
Stocks rose and the currency fell. The benchmark Kospi index of stocks gained 0.3 percent to 1878.56 at 9:34 a.m. in Seoul. The won fell 0.02 percent to 938.45 against the dollar.
Exports, Consumption
Exports of goods rose 5.2 percent in the second quarter, matching the earlier estimate, today's report showed. Private consumption gained 0.8 percent, also unchanged from the earlier estimate. Business investment climbed 3.4 percent. Construction investment dropped 1.3 percent, less than the 1.4 percent decline earlier estimated.
The services industry expanded 1.3 percent in the second quarter from the first, compared with the previous estimate of 1.1 percent. A 22 percent gain in the country's stock index in the first six months of this year helped boost demand for financial products, today's report showed. The financial and insurance sector expanded 5.1 percent from the first quarter, up from the previous estimate of 3.6 percent.
Hyundai Motor Co., the country's largest automaker, said local sales jumped 88 percent and exports climbed 53 percent in July. Samsung Heavy Industries Co., the world's second-largest shipbuilder, has received $14.5 billion in orders this year, 97 percent of its annual goal of a record $15 billion.
2007 Growth Forecast
The central bank's 2007 GDP growth forecast of 4.5 percent remains ``valid,'' Ahn Kil Hyo, a central bank official said at a press briefing in Seoul.
Manufacturing expanded 3.6 percent in the second quarter from the first, matching the previous estimate. Manufacturers' confidence is at a 17-month high and factory production climbed seven times faster than expected in July.
Still, interest-rate increases may stifle spending. The Bank of Korea raised borrowing costs for the second time in two months on Aug. 9, bringing the benchmark rate to a six-year high of 5 percent.
``Two interest-rate hikes and sharp corrections in equity markets at home and abroad will eventually work against consumer spending unless household income growth unexpectedly accelerates,'' said Lim Jiwon, an economist at JPMorgan Chase & Co. in Seoul.
The benchmark Kospi index has fallen 6.5 percent since setting a record on July 25. For the year it has gained 31 percent.
Sunday, September 2, 2007
Wednesday, August 29, 2007
Industrial Output Rises Rapidly
From Bloomberg today:
South Korean Factory Output Jumps on Chips, Phones
South Korea's industrial production rose seven times faster than expected in July as companies increased output of semiconductors and mobile phones.
Manufacturing grew 2.1 percent from June, when it gained 1.9 percent, the statistics office said today in Gwacheon, South Korea. The median forecast in a Bloomberg News survey of 11 economists was for a 0.3 percent increase.
An increase in output may help to protect Asia's third- largest economy from a slowdown in consumer spending after the benchmark stock index fell from a record and the central bank raised interest rates twice in two months. Overseas shipments, which account for about 40 percent of the $887 billion economy, rose at the fastest pace in six months in July.
``Upbeat export momentum will keep the economy chugging along,'' said Kim Jae Eun, an economist at SK Securities Co. in Seoul. ``The economic recovery will remain unscathed for the moment.''
The won closed at 942 per dollar at 3 p.m. in Seoul, down 0.2 percent. The yield on three-year government bonds fell 2 basis points at 5.34 percent.
From a year earlier, industrial output climbed 14.3 percent in July, the fastest pace in 10 months, up from a 7.7 percent increase in June.
Production last year was depressed by strikes at Hyundai Motor Co. and its affiliate Kia Motors Corp. Auto shipments fell almost a third in July 2006. Car production jumped 38.1 percent in July from a year ago. From June, auto production declined 8.4 percent in July, today's report showed.
Semiconductors, Mobile Phones
Production of semiconductors rose 4.9 percent from June and mobile-phone output climbed 9.5 percent, both on rising demand from overseas buyers, today's report showed.
Semiconductors and mobile phone are ``two important sectors in assessing the impact of any U.S. slowdown on Asia,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. Mobile-phone demand shows an ``ongoing strength in consumer spending'' as the appetite for new model handsets tend to be discretionary.
Sales of consumer goods rose 1.6 percent from June. Corporate investment on facilities climbed 1.3 percent from a year ago.
Factory output may slow in coming months if South Koreans spend less after the central bank raised interest rates twice this year and local stock prices declined.
The benchmark Kospi stock index has dropped 8.9 percent since setting a record on July 25 on concern a U.S. housing recession would spread and slow global growth.
``The clear risk to what is a very optimistic outlook on South Korea at present is the increased likelihood of a more substantial slowing in U.S. economic activity,'' Maguire said.
The Bank of Korea lifted borrowing costs for a second time in two months on Aug. 9, bringing the benchmark rate to a six- year high.
Construction orders dropped 14.9 percent in July from a year ago, as there were fewer orders to build homes.
South Korean Factory Output Jumps on Chips, Phones
South Korea's industrial production rose seven times faster than expected in July as companies increased output of semiconductors and mobile phones.
Manufacturing grew 2.1 percent from June, when it gained 1.9 percent, the statistics office said today in Gwacheon, South Korea. The median forecast in a Bloomberg News survey of 11 economists was for a 0.3 percent increase.
An increase in output may help to protect Asia's third- largest economy from a slowdown in consumer spending after the benchmark stock index fell from a record and the central bank raised interest rates twice in two months. Overseas shipments, which account for about 40 percent of the $887 billion economy, rose at the fastest pace in six months in July.
``Upbeat export momentum will keep the economy chugging along,'' said Kim Jae Eun, an economist at SK Securities Co. in Seoul. ``The economic recovery will remain unscathed for the moment.''
The won closed at 942 per dollar at 3 p.m. in Seoul, down 0.2 percent. The yield on three-year government bonds fell 2 basis points at 5.34 percent.
From a year earlier, industrial output climbed 14.3 percent in July, the fastest pace in 10 months, up from a 7.7 percent increase in June.
Production last year was depressed by strikes at Hyundai Motor Co. and its affiliate Kia Motors Corp. Auto shipments fell almost a third in July 2006. Car production jumped 38.1 percent in July from a year ago. From June, auto production declined 8.4 percent in July, today's report showed.
Semiconductors, Mobile Phones
Production of semiconductors rose 4.9 percent from June and mobile-phone output climbed 9.5 percent, both on rising demand from overseas buyers, today's report showed.
Semiconductors and mobile phone are ``two important sectors in assessing the impact of any U.S. slowdown on Asia,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. Mobile-phone demand shows an ``ongoing strength in consumer spending'' as the appetite for new model handsets tend to be discretionary.
Sales of consumer goods rose 1.6 percent from June. Corporate investment on facilities climbed 1.3 percent from a year ago.
Factory output may slow in coming months if South Koreans spend less after the central bank raised interest rates twice this year and local stock prices declined.
The benchmark Kospi stock index has dropped 8.9 percent since setting a record on July 25 on concern a U.S. housing recession would spread and slow global growth.
``The clear risk to what is a very optimistic outlook on South Korea at present is the increased likelihood of a more substantial slowing in U.S. economic activity,'' Maguire said.
The Bank of Korea lifted borrowing costs for a second time in two months on Aug. 9, bringing the benchmark rate to a six- year high.
Construction orders dropped 14.9 percent in July from a year ago, as there were fewer orders to build homes.
Wednesday, August 8, 2007
Bank of Korea Raises Rates
The Financial Times this morning:
Bank of Korea surprises with rate increase
By Song Jung-a in Seoul
Published: August 9 2007 06:48 | Last updated: August 9 2007 06:48
The Bank of Korea unexpectedly raised its benchmark interest rate by a quarter point to a six-year high of 5 per cent on Thursday to absorb excessive market liquidity and contain growing inflationary pressure.
The rate hike, the first ever to follow just a month after a previous hike, surprised South Korea’s financial markets, driving bond prices down and pushing the won higher.
Lee Seong-tae, the BoK governor, said strong economic growth and increasing price pressure prompted the central bank to raise interest rates again as financial markets showed signs of instability amid explosive growth in the money supply.
South Korea’s economy grew 4.9 per cent in the second quarter, the fastest pace in over a year, beating economists’ expectations. The strong growth was propelled by robust exports, which jumped 20 per cent in July from a year earlier, and industrial output rose 7.6 per cent in June.
Mr Lee hinted that further tightening is unlikely this year, saying that ”the degree of financial accommodation will be markedly reduced” with the two consecutive rate hikes. And he cautioned that inflationary pressure would increase in the second half, due to a recovery in domestic demand and higher oil prices.
Bank loans to households increased by Won1,770bn in July from June, the biggest monthly gain in five months. Lending to small and mid-sized companies rose by Won3,100bn in July, increasing the risk of an asset bubble. Inflation remained stable at 2.5 per cent but Mr Lee predicted that upward pressure would grow in coming months.
Kwon O-kyu, the finance minister, supported the BoK’s move, saying the economy was showing ”clearer signs” of a recovery on the back of stronger consumption and brisk exports. ”The economic recovery, which started gradually from the beginning of the year, is becoming clearer,” he told reporters.
Both Mr Lee and Mr Kwon maintained their upbeat economic outlook, saying that the upward trend will continue in the second half, although higher oil prices and the stronger won still pose risks to economic growth. The BoK has forecast Asia’s third-largest economy to grow 4.5 per cent this year after expanding by 5 per cent last year.
Financial markets showed a sharp reaction to the surprise rate hike Thursday. The yield on the benchmark five-year government bond surged 7 basis points to a two-week high of 5.4 per cent and the won rose 0.2 per cent to 922.15 against the dollar in morning trading. The Kospi benchmark stock index pared gains to 0.6 per cent after being up as much as 1.3 per cent before the announcement.
and Bloomberg:
Bank of Korea Unexpectedly Raises Key Rate to 5%
The Bank of Korea unexpectedly raised its benchmark interest rate for a second time in as many months to curb lending that may fuel asset-price bubbles.
Governor Lee Seong Tae and his board increased the overnight call rate by a quarter point to 5 percent, the highest since July 2001, the central bank said in Seoul today. None of the 14 economists surveyed by Bloomberg News predicted the move.
Finance Minister Kwon Okyu said the decision was ``appropriate.'' He and Lee want to avoid a repeat of a debt bubble that burst in 2004 and stunted economic growth. Lending to households rose at the fastest pace in five months in July.
``The tipping point is likely to have been the explosion in household borrowing over July,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. ``The crippling debt overhang of 2001-03 remains clear in the mind of the central bank.''
In 2004, borrowers who had used credit cards to amass debt defaulted in record numbers, slowing the economy's expansion.
The yield on the benchmark five-year government bond surged 10 basis points to 5.43 percent as of 1:50 p.m. in Seoul, the biggest jump since October 2005. The won rose 0.2 percent to 922.32 per dollar. The Kospi stock index pared gains to 0.3 percent after rising as much as 1.3 percent before the decision.
Economists had expected the bank to keep rates on hold to assess the effect of the July increase and monitor whether a U.S. subprime mortgage slump will affect global growth. Today's move was the bank's first-ever back-to-back rate increase.
Urgent Task
``Concerns over soaring money growth outweighed U.S. sub- prime woes,'' said Kim Jae Eun, an economist at SK Securities Co. in Seoul. ``The most urgent task for the Bank of Korea is to put a lid on rising money growth and ensure fast growth won't cause asset-price bubbles and inflation.''
The Bank of Korea also raised the rate on so-called aggregate loans, which are offered to local banks to spur lending to smaller firms, to 3.25 percent from 3 percent.
``With a series of accumulated rate hikes, the degree of monetary easing that was supportive of the economic recovery has lessened considerably,'' Governor Lee told reporters in Seoul.
Lending by commercial banks to households surged 1.77 trillion won ($1.9 billion) in July from June, the central bank said yesterday. Loans to small and mid-sized businesses rose 3.1 trillion won, slowing from June's 8.1 trillion won gain, which was the biggest increase since December 2000.
Further Moves
``Given the hawkish tone of the central bank, a further tightening move before year-end cannot be ruled out,'' said Frederic Neumann, an economist with HSBC Markets Ltd. in Singapore. ``However, this will become dependent on trends in credit and liquidity growth over the next few months.''
Neumann maintained his prediction that lending and money supply will slow in response to credit-tightening measures and the key rate will stay at 5 percent for the rest of the year.
Central banks globally are battling to curb inflation as booming world economic growth forces up food and commodity prices. Australia raised its key rate to an 11-year high of 6.5 percent yesterday, and England, Canada and New Zealand all increased borrowing costs in the past month. European Central Bank President Jean-Claude Trichet said last week he may raise his benchmark rate from 4 percent next month.
South Korea's consumer-price inflation advanced 0.4 percent in July from June, when it was unchanged. The annual inflation rate remained at 2.5 percent. Consumer prices will climb 2.6 percent in the second half of 2007, accelerating from 2.2 percent in the first half, the central bank said last month.
Economic Revival
Growing signs of economic revival strengthened the case for a rate increase.
Consumer confidence climbed to the highest in 16 months in July, the National Statistical Office said today, signaling shoppers may help to sustain the economy's longest expansion in a decade. Consumer spending is showing a mild recovery, the central bank said today.
The economy expanded 1.7 percent in the three months to June 30, the quickest rate in 18 months. Exports gained 20 percent in July, while in June, service companies expanded at the quickest rate in almost five years and industrial production climbed for a third month.
``The Bank of Korea might think that hiking rates sooner than expected gives them room for a rainy day in the future,'' said Kwon Young Sun, an economist with Lehman Brothers Inc. in Hong Kong. ``Without any significant upside risks to growth, the bank should stay on hold for the rest of the year.''
Today's rate increase came even as South Korea's currency, the won, has strengthened. The won has surged to a 10-year high against the yen, the currency of its major export competitor.
Governor Lee said today that the won's strength will have little effect on easing inflationary pressure. Finance Minister Kwon said last week that the yen's weakness isn't justified. Borrowing in yen to buy higher-yielding assets -- the so-called carry trade -- threatens to destabilize global markets, he said.
The central bank last week introduced measures to restrict companies from borrowing in foreign currencies as it seeks to reduce the won's gains.
Bank of Korea surprises with rate increase
By Song Jung-a in Seoul
Published: August 9 2007 06:48 | Last updated: August 9 2007 06:48
The Bank of Korea unexpectedly raised its benchmark interest rate by a quarter point to a six-year high of 5 per cent on Thursday to absorb excessive market liquidity and contain growing inflationary pressure.
The rate hike, the first ever to follow just a month after a previous hike, surprised South Korea’s financial markets, driving bond prices down and pushing the won higher.
Lee Seong-tae, the BoK governor, said strong economic growth and increasing price pressure prompted the central bank to raise interest rates again as financial markets showed signs of instability amid explosive growth in the money supply.
South Korea’s economy grew 4.9 per cent in the second quarter, the fastest pace in over a year, beating economists’ expectations. The strong growth was propelled by robust exports, which jumped 20 per cent in July from a year earlier, and industrial output rose 7.6 per cent in June.
Mr Lee hinted that further tightening is unlikely this year, saying that ”the degree of financial accommodation will be markedly reduced” with the two consecutive rate hikes. And he cautioned that inflationary pressure would increase in the second half, due to a recovery in domestic demand and higher oil prices.
Bank loans to households increased by Won1,770bn in July from June, the biggest monthly gain in five months. Lending to small and mid-sized companies rose by Won3,100bn in July, increasing the risk of an asset bubble. Inflation remained stable at 2.5 per cent but Mr Lee predicted that upward pressure would grow in coming months.
Kwon O-kyu, the finance minister, supported the BoK’s move, saying the economy was showing ”clearer signs” of a recovery on the back of stronger consumption and brisk exports. ”The economic recovery, which started gradually from the beginning of the year, is becoming clearer,” he told reporters.
Both Mr Lee and Mr Kwon maintained their upbeat economic outlook, saying that the upward trend will continue in the second half, although higher oil prices and the stronger won still pose risks to economic growth. The BoK has forecast Asia’s third-largest economy to grow 4.5 per cent this year after expanding by 5 per cent last year.
Financial markets showed a sharp reaction to the surprise rate hike Thursday. The yield on the benchmark five-year government bond surged 7 basis points to a two-week high of 5.4 per cent and the won rose 0.2 per cent to 922.15 against the dollar in morning trading. The Kospi benchmark stock index pared gains to 0.6 per cent after being up as much as 1.3 per cent before the announcement.
and Bloomberg:
Bank of Korea Unexpectedly Raises Key Rate to 5%
The Bank of Korea unexpectedly raised its benchmark interest rate for a second time in as many months to curb lending that may fuel asset-price bubbles.
Governor Lee Seong Tae and his board increased the overnight call rate by a quarter point to 5 percent, the highest since July 2001, the central bank said in Seoul today. None of the 14 economists surveyed by Bloomberg News predicted the move.
Finance Minister Kwon Okyu said the decision was ``appropriate.'' He and Lee want to avoid a repeat of a debt bubble that burst in 2004 and stunted economic growth. Lending to households rose at the fastest pace in five months in July.
``The tipping point is likely to have been the explosion in household borrowing over July,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. ``The crippling debt overhang of 2001-03 remains clear in the mind of the central bank.''
In 2004, borrowers who had used credit cards to amass debt defaulted in record numbers, slowing the economy's expansion.
The yield on the benchmark five-year government bond surged 10 basis points to 5.43 percent as of 1:50 p.m. in Seoul, the biggest jump since October 2005. The won rose 0.2 percent to 922.32 per dollar. The Kospi stock index pared gains to 0.3 percent after rising as much as 1.3 percent before the decision.
Economists had expected the bank to keep rates on hold to assess the effect of the July increase and monitor whether a U.S. subprime mortgage slump will affect global growth. Today's move was the bank's first-ever back-to-back rate increase.
Urgent Task
``Concerns over soaring money growth outweighed U.S. sub- prime woes,'' said Kim Jae Eun, an economist at SK Securities Co. in Seoul. ``The most urgent task for the Bank of Korea is to put a lid on rising money growth and ensure fast growth won't cause asset-price bubbles and inflation.''
The Bank of Korea also raised the rate on so-called aggregate loans, which are offered to local banks to spur lending to smaller firms, to 3.25 percent from 3 percent.
``With a series of accumulated rate hikes, the degree of monetary easing that was supportive of the economic recovery has lessened considerably,'' Governor Lee told reporters in Seoul.
Lending by commercial banks to households surged 1.77 trillion won ($1.9 billion) in July from June, the central bank said yesterday. Loans to small and mid-sized businesses rose 3.1 trillion won, slowing from June's 8.1 trillion won gain, which was the biggest increase since December 2000.
Further Moves
``Given the hawkish tone of the central bank, a further tightening move before year-end cannot be ruled out,'' said Frederic Neumann, an economist with HSBC Markets Ltd. in Singapore. ``However, this will become dependent on trends in credit and liquidity growth over the next few months.''
Neumann maintained his prediction that lending and money supply will slow in response to credit-tightening measures and the key rate will stay at 5 percent for the rest of the year.
Central banks globally are battling to curb inflation as booming world economic growth forces up food and commodity prices. Australia raised its key rate to an 11-year high of 6.5 percent yesterday, and England, Canada and New Zealand all increased borrowing costs in the past month. European Central Bank President Jean-Claude Trichet said last week he may raise his benchmark rate from 4 percent next month.
South Korea's consumer-price inflation advanced 0.4 percent in July from June, when it was unchanged. The annual inflation rate remained at 2.5 percent. Consumer prices will climb 2.6 percent in the second half of 2007, accelerating from 2.2 percent in the first half, the central bank said last month.
Economic Revival
Growing signs of economic revival strengthened the case for a rate increase.
Consumer confidence climbed to the highest in 16 months in July, the National Statistical Office said today, signaling shoppers may help to sustain the economy's longest expansion in a decade. Consumer spending is showing a mild recovery, the central bank said today.
The economy expanded 1.7 percent in the three months to June 30, the quickest rate in 18 months. Exports gained 20 percent in July, while in June, service companies expanded at the quickest rate in almost five years and industrial production climbed for a third month.
``The Bank of Korea might think that hiking rates sooner than expected gives them room for a rainy day in the future,'' said Kwon Young Sun, an economist with Lehman Brothers Inc. in Hong Kong. ``Without any significant upside risks to growth, the bank should stay on hold for the rest of the year.''
Today's rate increase came even as South Korea's currency, the won, has strengthened. The won has surged to a 10-year high against the yen, the currency of its major export competitor.
Governor Lee said today that the won's strength will have little effect on easing inflationary pressure. Finance Minister Kwon said last week that the yen's weakness isn't justified. Borrowing in yen to buy higher-yielding assets -- the so-called carry trade -- threatens to destabilize global markets, he said.
The central bank last week introduced measures to restrict companies from borrowing in foreign currencies as it seeks to reduce the won's gains.
Borrowing in S Korea
In Bloomberg today:
South Korea's Household Debt Grows at Fastest Pace in 5 Months
By Kim Kyoungwha
Aug. 8 (Bloomberg) -- South Korea's household debt grew at the fastest pace in five months in July, increasing pressure on the central bank to raise interest rates for a second time this year.
Lending by commercial banks to households surged 1.77 trillion won ($1.9 billion) from the previous month, the biggest rise since February, the Bank of Korea said in Seoul today. The gain was more than double a 776 billion won increase in June.
A resurgence in household borrowing may persuade central bank Governor Lee Seong Tae and his board to increase the benchmark interest rate from a six-year high. Policy makers raised the key rate to 4.75 percent last month on concern a jump in lending may spur inflation as economic growth accelerates.
Lee and his policy makers meet at 9 a.m. in Seoul tomorrow and an interest-rate decision is due before 11 a.m.
All 14 economists surveyed by Bloomberg News expect the bank will leave the rate at 4.75 percent. Still, nine of 14 analysts see a quarter-point increase to 5 percent later this year.
Lending to small and mid-sized businesses rose by 3.1 trillion won in July, slowing from June's 8.1 trillion won gain, which was the biggest monthly increase since the bank began compiling the figures in December 2000.
Mortgage lending advanced 127.4 billion in July, after climbing 710 billion won in June, today's report showed.
Lee and Finance Minister Kwon Okyu say that excessive lending and money-supply growth could push up prices and result in an asset bubble, undermining the economy's longest expansion in a decade.
In an effort to slow borrowing, the central bank on June 21 reduced the funds it makes available for loans to small businesses for the first time in six months. Last year, the bank ordered commercial lenders to hold more money as reserves.
Lf, the broadest measure of the money supply and formerly known as M3, rose an estimated 10.4 percent in June from May, the central bank said, citing preliminary figures. Lf stands for liquidity of financial institutions.
South Korea's Household Debt Grows at Fastest Pace in 5 Months
By Kim Kyoungwha
Aug. 8 (Bloomberg) -- South Korea's household debt grew at the fastest pace in five months in July, increasing pressure on the central bank to raise interest rates for a second time this year.
Lending by commercial banks to households surged 1.77 trillion won ($1.9 billion) from the previous month, the biggest rise since February, the Bank of Korea said in Seoul today. The gain was more than double a 776 billion won increase in June.
A resurgence in household borrowing may persuade central bank Governor Lee Seong Tae and his board to increase the benchmark interest rate from a six-year high. Policy makers raised the key rate to 4.75 percent last month on concern a jump in lending may spur inflation as economic growth accelerates.
Lee and his policy makers meet at 9 a.m. in Seoul tomorrow and an interest-rate decision is due before 11 a.m.
All 14 economists surveyed by Bloomberg News expect the bank will leave the rate at 4.75 percent. Still, nine of 14 analysts see a quarter-point increase to 5 percent later this year.
Lending to small and mid-sized businesses rose by 3.1 trillion won in July, slowing from June's 8.1 trillion won gain, which was the biggest monthly increase since the bank began compiling the figures in December 2000.
Mortgage lending advanced 127.4 billion in July, after climbing 710 billion won in June, today's report showed.
Lee and Finance Minister Kwon Okyu say that excessive lending and money-supply growth could push up prices and result in an asset bubble, undermining the economy's longest expansion in a decade.
In an effort to slow borrowing, the central bank on June 21 reduced the funds it makes available for loans to small businesses for the first time in six months. Last year, the bank ordered commercial lenders to hold more money as reserves.
Lf, the broadest measure of the money supply and formerly known as M3, rose an estimated 10.4 percent in June from May, the central bank said, citing preliminary figures. Lf stands for liquidity of financial institutions.
Tuesday, July 31, 2007
South Korean Exports
From Bloomberg:
South Korea's Export Growth Seen Accelerating; Prices May Rise
uly 31 (Bloomberg) -- South Korea's exports probably rose at the fastest pace in almost three years in July, stoking economic growth. Consumer prices likely increased from June.
Overseas shipments surged 21 percent from a year earlier, according to the median estimate in a Bloomberg News survey of 11 economists. That would be the biggest gain since November 2004. Consumer prices advanced an unadjusted 0.3 percent from the previous month, the survey showed. Trade will be released at 10 a.m. in Seoul on Aug. 1 and the prices report at 1:30 p.m.
Rising exports have driven 17 consecutive quarters of growth in Asia's third-largest economy, the longest expansion in more than a decade. Increased overseas demand is stoking sales of LG Electronics Inc. mobile phones, Kia Motors Corp. cars and Hyundai Heavy Industries Co. ships.
``Strong exports and imports would suggest continued growth momentum in the second half this year,'' said Oh Suktae, an economist at Citibank Korea Inc. in Seoul. ``We continue to focus on the performance of the semiconductor and shipbuilding sectors as potential drivers of export strength.''
South Korea's economy expanded 1.7 percent in the second quarter from the previous three months, the central bank said last week, more than the 1.3 percent median estimate in a Bloomberg News survey of economists. That was the strongest rate since the fourth quarter of 2005.
Hyundai Heavy, the world's largest shipyard, said on July 27 it received an order for eight large-sized container vessels valued at 1.21 trillion won ($1.3 billion), its biggest contract this year.
Global Growth
Signs of faster global expansion will keep boosting demand for South Korea's exports, which make up 40 percent of the economy. The International Monetary Fund last week raised its forecast for world growth, downplaying the risk of a U.S. credit crunch crippling economic expansion.
The global economy will expand 5.2 percent in 2007 and 2008, the Washington-based IMF said, more than the 4.9 percent it predicted for both years in April.
South Korea's consumer prices climbed 0.3 percent from June, when they were unchanged, the Bloomberg News survey showed.
``Rising oil prices continue to push up the cost of industrial goods, and a modest recovery in consumption suggests upward pressure on service costs,'' Kwon Young Sun, an economist at Lehman Brothers Holdings Inc. in Hong Kong, wrote in a report. ``A counteracting force will be falling prices for agricultural, livestock and fishery products.''
Annual Inflation
The annual inflation rate stayed unchanged at 2.5 percent in July, according to the survey of economists. That would be at the lower end of the central bank's target range of between 2.5 percent and 3.5 percent.
The Bank of Korea raised its overnight call rate target on July 12 to a six-year high of 4.75 percent on concern record lending to small companies may spur inflation. Ten of 11 economists say the bank will increase the benchmark rate to 5 percent by December.
The following tables show economists' estimates for the change in exports and imports in July from a year earlier and unadjusted consumer prices from the previous month and from a year earlier:
South Korea's Export Growth Seen Accelerating; Prices May Rise
uly 31 (Bloomberg) -- South Korea's exports probably rose at the fastest pace in almost three years in July, stoking economic growth. Consumer prices likely increased from June.
Overseas shipments surged 21 percent from a year earlier, according to the median estimate in a Bloomberg News survey of 11 economists. That would be the biggest gain since November 2004. Consumer prices advanced an unadjusted 0.3 percent from the previous month, the survey showed. Trade will be released at 10 a.m. in Seoul on Aug. 1 and the prices report at 1:30 p.m.
Rising exports have driven 17 consecutive quarters of growth in Asia's third-largest economy, the longest expansion in more than a decade. Increased overseas demand is stoking sales of LG Electronics Inc. mobile phones, Kia Motors Corp. cars and Hyundai Heavy Industries Co. ships.
``Strong exports and imports would suggest continued growth momentum in the second half this year,'' said Oh Suktae, an economist at Citibank Korea Inc. in Seoul. ``We continue to focus on the performance of the semiconductor and shipbuilding sectors as potential drivers of export strength.''
South Korea's economy expanded 1.7 percent in the second quarter from the previous three months, the central bank said last week, more than the 1.3 percent median estimate in a Bloomberg News survey of economists. That was the strongest rate since the fourth quarter of 2005.
Hyundai Heavy, the world's largest shipyard, said on July 27 it received an order for eight large-sized container vessels valued at 1.21 trillion won ($1.3 billion), its biggest contract this year.
Global Growth
Signs of faster global expansion will keep boosting demand for South Korea's exports, which make up 40 percent of the economy. The International Monetary Fund last week raised its forecast for world growth, downplaying the risk of a U.S. credit crunch crippling economic expansion.
The global economy will expand 5.2 percent in 2007 and 2008, the Washington-based IMF said, more than the 4.9 percent it predicted for both years in April.
South Korea's consumer prices climbed 0.3 percent from June, when they were unchanged, the Bloomberg News survey showed.
``Rising oil prices continue to push up the cost of industrial goods, and a modest recovery in consumption suggests upward pressure on service costs,'' Kwon Young Sun, an economist at Lehman Brothers Holdings Inc. in Hong Kong, wrote in a report. ``A counteracting force will be falling prices for agricultural, livestock and fishery products.''
Annual Inflation
The annual inflation rate stayed unchanged at 2.5 percent in July, according to the survey of economists. That would be at the lower end of the central bank's target range of between 2.5 percent and 3.5 percent.
The Bank of Korea raised its overnight call rate target on July 12 to a six-year high of 4.75 percent on concern record lending to small companies may spur inflation. Ten of 11 economists say the bank will increase the benchmark rate to 5 percent by December.
The following tables show economists' estimates for the change in exports and imports in July from a year earlier and unadjusted consumer prices from the previous month and from a year earlier:
Tuesday, July 24, 2007
Moody's Upgrade Sovereign Rating
From Bloomberg this morning:
South Korean Won Rises to Highest Since 1997 on Growth, Moody's
July 25 (Bloomberg) -- The South Korean won rose, matching the highest since 1997, after economic growth accelerated to the fastest in 1 1/2 years and Moody's Investors Service upgraded the country's debt ratings.
Government and central bank concerns that the won's 1.7 percent advance this year would hurt exports may prove unfounded as overseas shipments gained 5.2 percent in the second quarter, nearly double the 2.7 percent increase in the prior three months. Moody's raised the sovereign rating one level to A2, citing ``fiscal prudence.''
``Whilst we don't expect any sharp moves on the back of a stronger economy the won can go stronger,'' said Magnus Prim, a senior foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. ``Though the view from the authorities is that they don't want it too much stronger.''
The currency rose as much as 0.1 percent to 913.00, matching the level reached Dec. 7 that was the highest since October 1997. It traded at 913.35 as of 1:52 p.m., according to Seoul Money Brokerage Services Ltd. The currency may strengthen to 910 in one month, said Prim.
Vice Finance Minister Kim Seok Dong warned July 19 the government is ``focusing'' on gains in the won.
Korea's economy expanded 1.7 percent from the first quarter, the Bank of Korea said in Seoul today, faster than the 1.3 percent median estimate of 11 economists in a Bloomberg News survey. From a year earlier, the economy grew 4.9 percent.
Moody's Rating Upgrade
The ratings upgrade comes after Moody's put the nation under review July 3. The move puts South Korea's rating on par with China, Hungary and Israel. A higher debt rating signals a lower risk of debt default and may help reduce South Korea's borrowing costs.
Benchmark five-year bond yields, which move inversely to the price, declined 2 basis points to 5.45 percent, according to Korea Exchange. The price of the 4 3/4 percent note due March 2012 rose 0.09, or 9 won per 10,000 won face amount, to 98.94.
``Yields aren't moving much because investors are taking a wait-and-see attitude after the recent rate increase by the central bank,'' said Lee Yong Gyoo, a general manager at Hanwha Securities Co.'s fixed-income management team. ``This may continue until the release of key economic data later this month.''
The Bank of Korea July 12 raised its benchmark interest rate for the first time in a year to 4.75 percent on concern record lending to small- and mid-sized companies may spur inflation.
South Korean Won Rises to Highest Since 1997 on Growth, Moody's
July 25 (Bloomberg) -- The South Korean won rose, matching the highest since 1997, after economic growth accelerated to the fastest in 1 1/2 years and Moody's Investors Service upgraded the country's debt ratings.
Government and central bank concerns that the won's 1.7 percent advance this year would hurt exports may prove unfounded as overseas shipments gained 5.2 percent in the second quarter, nearly double the 2.7 percent increase in the prior three months. Moody's raised the sovereign rating one level to A2, citing ``fiscal prudence.''
``Whilst we don't expect any sharp moves on the back of a stronger economy the won can go stronger,'' said Magnus Prim, a senior foreign-exchange strategist at Skandinaviska Enskilda Banken in Singapore. ``Though the view from the authorities is that they don't want it too much stronger.''
The currency rose as much as 0.1 percent to 913.00, matching the level reached Dec. 7 that was the highest since October 1997. It traded at 913.35 as of 1:52 p.m., according to Seoul Money Brokerage Services Ltd. The currency may strengthen to 910 in one month, said Prim.
Vice Finance Minister Kim Seok Dong warned July 19 the government is ``focusing'' on gains in the won.
Korea's economy expanded 1.7 percent from the first quarter, the Bank of Korea said in Seoul today, faster than the 1.3 percent median estimate of 11 economists in a Bloomberg News survey. From a year earlier, the economy grew 4.9 percent.
Moody's Rating Upgrade
The ratings upgrade comes after Moody's put the nation under review July 3. The move puts South Korea's rating on par with China, Hungary and Israel. A higher debt rating signals a lower risk of debt default and may help reduce South Korea's borrowing costs.
Benchmark five-year bond yields, which move inversely to the price, declined 2 basis points to 5.45 percent, according to Korea Exchange. The price of the 4 3/4 percent note due March 2012 rose 0.09, or 9 won per 10,000 won face amount, to 98.94.
``Yields aren't moving much because investors are taking a wait-and-see attitude after the recent rate increase by the central bank,'' said Lee Yong Gyoo, a general manager at Hanwha Securities Co.'s fixed-income management team. ``This may continue until the release of key economic data later this month.''
The Bank of Korea July 12 raised its benchmark interest rate for the first time in a year to 4.75 percent on concern record lending to small- and mid-sized companies may spur inflation.
Q2 GDP Growth
From the Financial Times:
Strong exports boost S Korea GDP Growth
The South Korean economy expanded at a much faster rate than expected in the second quarter, growing by 4.9 per cent compared to a year earlier, increasing the likelihood of further interest rate rises.
The acceleration – from an annual rate of 4 per cent in the first quarter – was largely due to robust exports and capital investment, according to preliminary date from the Bank of Korea released on Wednesday.
“Today’s data strengthens the case for another rate hike by the Bank of Korea, taking the benchmark rate to 5 per cent from 4.75 per cent currently,” said Frederic Neumann, Korea economist at HSBC.
“Even if there are few evident inflationary pressures, policy-makers continue to be concerned over loan growth and the strong output figure should lessen concerns that tighter monetary policy would derail the recovery,” he said.
Earlier this month the central bank raised interest rates for the first time in 10 months, citing inflationary pressure and abundant liquidity in Asia’s third largest economy.
The Bank of Korea data showed the quarterly rate of gross domestic product growth accelerated from 0.9 per cent in the first three months of the year to 1.7 per cent in the latest period, the fastest rate in 18 months. It was much higher than the 1.3 per cent consensus forecast of economists polled by Reuters.
The benchmark Kospi index, which briefly crossed the 2,000 mark on Tuesday to hit a record high, declined 1.12 per cent, to 1,969, when the Seoul stock market opened on Wednesday morning, largely due to profit-taking.
The Korean won, which was trading near a seven month high on Tuesday, also weakened slightly, trading at Won914.65 to the US dollar.
The GDP increase was due to strong growth in exports – they were 5.2 per cent higher in the second quarter, almost double the rate of the previous three months – and the sound performance of the service sector, which grew by 1.1 per cent, only slightly slower than the 1.2 per cent expansion in the preceding three months.
“The second-quarter growth was marginally higher than our expectations, and the economy seems to have reached the upper end of the bank’s target range of growth,” said Lee Kwang-june, director of the central bank’s economic statistics division.
“In the third quarter, the economy will continue to expand, but the quarterly growth is not likely to be as high as 1.7 per cent,” he told reporters.
The central bank and the government this month raised growth forecasts for this year to 4.5 per cent and 4.6 per cent respectively, and with the Bank of Korea operating a conservative monetary policy, further rate rises are expected.
However, some economists have warned this could choke off the nascent recovery. The economy remains in a fragile position, with the strong Korean currency – the won has gained 1.2 per cent against the dollar and 3.3 per cent against the Japanese yen so far this year – continuing to hurt exporters. Meanwhile, the domestic recovery has yet to get properly under way.
Strong exports boost S Korea GDP Growth
The South Korean economy expanded at a much faster rate than expected in the second quarter, growing by 4.9 per cent compared to a year earlier, increasing the likelihood of further interest rate rises.
The acceleration – from an annual rate of 4 per cent in the first quarter – was largely due to robust exports and capital investment, according to preliminary date from the Bank of Korea released on Wednesday.
“Today’s data strengthens the case for another rate hike by the Bank of Korea, taking the benchmark rate to 5 per cent from 4.75 per cent currently,” said Frederic Neumann, Korea economist at HSBC.
“Even if there are few evident inflationary pressures, policy-makers continue to be concerned over loan growth and the strong output figure should lessen concerns that tighter monetary policy would derail the recovery,” he said.
Earlier this month the central bank raised interest rates for the first time in 10 months, citing inflationary pressure and abundant liquidity in Asia’s third largest economy.
The Bank of Korea data showed the quarterly rate of gross domestic product growth accelerated from 0.9 per cent in the first three months of the year to 1.7 per cent in the latest period, the fastest rate in 18 months. It was much higher than the 1.3 per cent consensus forecast of economists polled by Reuters.
The benchmark Kospi index, which briefly crossed the 2,000 mark on Tuesday to hit a record high, declined 1.12 per cent, to 1,969, when the Seoul stock market opened on Wednesday morning, largely due to profit-taking.
The Korean won, which was trading near a seven month high on Tuesday, also weakened slightly, trading at Won914.65 to the US dollar.
The GDP increase was due to strong growth in exports – they were 5.2 per cent higher in the second quarter, almost double the rate of the previous three months – and the sound performance of the service sector, which grew by 1.1 per cent, only slightly slower than the 1.2 per cent expansion in the preceding three months.
“The second-quarter growth was marginally higher than our expectations, and the economy seems to have reached the upper end of the bank’s target range of growth,” said Lee Kwang-june, director of the central bank’s economic statistics division.
“In the third quarter, the economy will continue to expand, but the quarterly growth is not likely to be as high as 1.7 per cent,” he told reporters.
The central bank and the government this month raised growth forecasts for this year to 4.5 per cent and 4.6 per cent respectively, and with the Bank of Korea operating a conservative monetary policy, further rate rises are expected.
However, some economists have warned this could choke off the nascent recovery. The economy remains in a fragile position, with the strong Korean currency – the won has gained 1.2 per cent against the dollar and 3.3 per cent against the Japanese yen so far this year – continuing to hurt exporters. Meanwhile, the domestic recovery has yet to get properly under way.
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