- · In our view, growth has bottomed in Korea. In H1 12, the risks are tilted towards GDP growth accelerating towards 4% y/y versus Bloomberg consensus estimate of 3.6%.
- · We maintain our view that Bank of Korea will remain on hold in H1 12.
- · Our end-2012 USDKRW forecast of 1040 is maintained.
- · We expect net exports and counter-cyclical fiscal policy to drive GDP growth in H1 12 followed by consumption and investment spending being the drivers of growth in H2 12.
- · We believe that resilient growth in the US and Japan will cushion the impact of a slowdown in Europe on Korea’s exports in H1 12.
- · We are already noticing the momentum of total exports ex-chemicals improving. This is due to the robust shipments of autos and heavy industrial products.
- · As China continues to loosen macroeconomic and sector level policies in H1 12, domestic demand for Korea’s products will increase. Sixty percent of Korea’s exports to China ultimately feed into the domestic economy.
- · With the outlook for exports improving, the momentum of private consumption and investment spending looks set to rebound as well in Korea.
- · We are not worried about the q/q contraction in Q4 11 private consumption and gross fixed capital formation. This was mainly driven by the slowdown in exports and negative sentiment from Europe related problems.
- · On a q/q basis, we expect private consumption and investment to rebound and be in positive territory in H1 12. The rebound could come as early as Q1 12 in our view.
- · Q4 11 GDP growth printed 3.4% y/y versus Bloomberg consensus estimate of 3.5%. 2011 GDP growth printed 3.6% y/y versus 6.2% in 2010.
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SEB tech team