Korea Exports Dent Optimism Over Global Tech Demand Recovery

(Bloomberg) -- South Korea’s flagging chip sales are set to send exports for a tenth monthly slide, dashing hopes of a near-term rebound in global tech demand.

Exports during the first 20 days of September tumbled 22% from a year earlier, data from the Korea Customs Service showed Monday. Shipments to China, South Korea’s biggest trading partner, plunged 30%.

Tech products showed a mixed performance -- semiconductor sales plummeted 40%, while those for mobile communication devices, which account for a smaller share of total exports, jumped 58%.

The weakness in semiconductor sales lays bare the gap between reality and optimistic views that have recently emerged about technology markets. Bank of Japan Governor Haruhiko Kuroda said last week the tech cycle had bottomed, while the world’s biggest maker of memory chips and smartphones Samsung Electronics Co. saw its share price reach a 15-month high last week.

“The primary question is whether chip sales improve or not,” said An Young-jin, an economist at SK Securities. “If major companies in China and the U.S. increase spending on servers, South Korea may benefit from chip supplies, but we need to keep watching whether that chance will materialize.”

Slumping global demand has hurt South Korea’s corporate investment and hiring, putting the economy on course for the slowest expansion since the global financial crisis. As the U.S.-China trade war shows no sign of ending, South Korea’s feud with Japan over export restrictions has deepened, hurting confidence in Asia’s key supply chain.

Most economists see the Bank of Korea easing in October or November to help prop up economic growth. The bank lowered its interest rate in July for the first time in three years, to 1.5%, which is just 25 basis points above a record low.

Overall imports fell 11% for the first twenty days of September from a year earlier. Exports to the U.S. dropped 21%, while imports rose 6.4%. Shipments to Japan fell 14%, while imports dropped 17%.

There were two less working days this year compared with the same period in 2018 due to the timing of Chuseok holiday, according to the customs office. Overseas shipments rose 15% from Aug. 1-20, the statement shows.

“Exports falling will probably continue for the rest of the year, weighing on South Korea’s growth as well as the won,” said Lee Young Hwa, an economist at Kyobo Securities in Seoul.

South Korea’s trade data serves as an indicator for global demand, due to their early release and Korean companies’ deep integration into the global supply chain.

--With assistance from Hooyeon Kim.

To contact the reporter on this story: Sam Kim in Seoul at skim609@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Jiyeun Lee, Peter Pae

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