South Korean exports battered by falling currencies, weak demand

Wednesday, 28 January 2015 00:00 - - {{hitsCtrl.values.hits}}

SEOUL (Reuters): South Korean exporters look set for their worst performance in several years in the current quarter, with the euro’s plunge to 11-year lows dealing an additional blow as China, their biggest market, cools and their rivals in Japan enjoy a revival. Home to export powerhouses such as Samsung Electronics and Hyundai Motor, South Korea will release full January trade data on 1 February, the first major exporting economy to do so. The signs are not good for an economy that, with exports last year equivalent to 51% of gross domestic product, is one of the world’s most heavily reliant on trade.

Customs data released last week for the first 20 days of January showed South Korean exports fell 9% in dollar value year-on-year. While the figures can be volatile, the calendar-adjusted daily average of $1.7 billion was the worst since January 2010, according to HI Investment & Securities. Park Sang-hyun, economist at HI Investment, said he was reviewing his 4.5% growth forecast for first-quarter exports, measured in nominal dollar-value terms, for a possible revision down to zero or negative. That would be the worst since late 2012. An official at Hyundai Motor, which together with affiliate Kia Motors is the world’s fifth-largest automaker, said falling currencies were having an impact. “It is a burden for us, for example, increasing the cost of marketing,” said the official, declining to be identified. The yen’s weakening by more than one-third against the dollar since late 2012 has allowed Japanese firms to either cut sales prices abroad or offer fat benefits to customers. Likewise, the euro has become super cheap after the European Central Bank embarked on its own quantitative easing this month, adopting the money printing strategy pioneered by Japan. By contrast, the won has been one the strongest currencies among major trading economies over the past three years, up 57% against the yen and 18% against the euro. Aside from won’s loss of competitiveness, South Korean exports are facing other threats, ranging from weak demand in major markets to neighbouring China’s industrial policy.