South Korean March Trade Balance Forecast


South Korean February Trade Balance approaching average capacity given at USD 3.31 billion. What should you expect for this month? Vincent Mivelaz, an analyst at Swissquote has shared his view on the South Korean March Trade Balance Forecast.

2 March, Swissquote – South Korea’s decreasing export growth slowed in February to 4% (average: 8.70%), its weakest rate since November 2016 due to decreasing overseas demand and New year holidays that reduced the number of working days and shipment for the automotive industry.

South Korean March Trade Balance Forecast

As strong global demand remains, we are expecting South Korean March exports data to approach the 6% range but strong tariff headwinds on steel from the second commercial partner (US) and estimated at 53% will be impacting South Korean export industry growth in the coming periods. South Korea remains US third steel supplier with a total amount of 3.6 million tons of steel, after Canada and Brazil.

South Korean February Trade Balance is given at USD 3.31 billion (average: USD 2.88 billion) and will be heading higher, supported by higher exports, stable inflation (4Q: 1.50%), improving private consumption (e.g. expansionary fiscal stimulus) and Bank of Korea’s cautious normalization measures (Repo Rate maintained at 1.50% since November 2017).

Binary risk in Germany

This weekend is event risk heavy with German SPD vote and Italian general elections. The market, judging from short-term vol, has shrugged off any significant impact. Yet in the back of everyone mind is the “what if”. The last few year’s investors have been plagued by “white swans” and this weekend is no different.

The SPD is currently holding a binding postal ballot of its 463,723 members on a coalition deal with Mrs. Merkel. Currently, the SPD and CDU (Merkel) are expected to form a central market, EU friendly coalition. Politically, Merkel has been allowed a final chance as her own party voted in favor of a grand coalition deal with the Social Democrats (SPD).

But if Sunday SPD votes to reject, German politics become a mess with no center coalition and possibly no Merkel. If SPD members vote “no” the most likely, the result will be new elections or possibly a minority government. A snap election opens the door for further gains for the anti-immigration AfD party. The current low polling suggests a tilt toward “yes” vote and grand coalitions. The binary aspect of this event makes it more worrisome in our mind.

Italy voting distribution can lead to market stability

Overall, we don’t see a major immediate effect from the Italian elections. The reason is divided vote. We see the probability that all of a sudden a single bloc gets a majority is unlikely (less than the binary result in Brexit or US election) We are in line with the market and expect a hung parliament, resulting in an extended period of coalition negotiations.

The primary reason is not the end of Europe populist insurgency or satisfaction with the status-quo but division of voting blocks. Most polls indicate a proportional three-party/coalition race (Democratic Party, Forza Italia and Five Star), making winning a majority highly challenging. The most radical result was the Five Star-led (anti-establishment) government is only a tail risk.

No Major Policy Changes Expected

In this scenario, we do not expect any major policy changes (due to a lack of political or fiscal capacity or due to a lack of appetite) and lower anti-EU rhetoric that would spook the markets. Due to official blackout, the most recent polls suggest M5S 26%, Center-right bloc 37%, PD 25% with 30-35% of the votes are undecided.

However, Italian voter polls have tended historically to be misleading. We believe there is a realistic probability that Berlusconi’s center-right block reaches the 40% threshold. Yet, a Berlusconi upset will have limited real impact being dismissed as Italian politics a surreal. A realistic tail risk this weekend is a “no” vote in Germans and Berlusconi party win in Italy. Walking into the Monday paper yelling “Chaos in European politics”, a significantly negative result for European assets.

Disclaimer

This article South Korean March Trade Balance Forecast was written by Vincent Mivelaz & Peter Rosenstreich, analysts at Swissquote. While every effort has been made to ensure that the data quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein.

This document does not constitute a recommendation to sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investments.

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