South Korean economic data are usually seen as leading indicators of the global economic cycle. USD-denominated exports contracted by -5.8% y/y in January (after -1.3% in December) due to a decline in exports to China and lower demand for memory chips. The Manufacturing PMI dropped to 48.3 points in January (after 49.8 in December) owing to a decrease in output and new domestic and exports orders. Looking ahead, we see limited room for improvement in both February and March as (i) U.S.-China trade related uncertainties remain and (ii) China’s demand growth will likely continue to slow. Trade is expected to get some traction from April, assuming (i) a positive outcome of U.S.-China’s trade talks and (ii) China’s stimulus starting to have a greater impact on the economy from Q2 onwards. We expect economic growth to rise by +2.5% in 2019 (after +2.7% in 2018).
