Improving domestic demand props up economy, off sets faltering exports

South Korea’s domestic demand seems to support the entire economy despite faltering exports stemming from weakening global demand, a government report recently showed.
“Domestic demand, particularly private consumption, has been gett ing bett er recently, although exports have been the decline,” the fi nance ministry recently said in its monthly economy assessment report. The report is based on the latest economic indicators on such key factors as output, exports, consumption and corporate investment that could provide clues as to how the economy has been faring in recent months. Recent data showed that the country’s retail sales gained 4.2 percent in March from a month earlier on a sharp rise in durable goods like passenger cars.
The South Korean government revived an excise tax cut program on cars earlier this year in order to boost private consumption and the entire economy in the end.
Despite the somewhat favorable assessment on the domestic side, external risks, such as the global economic slowdown; uncertainties over the U.S. rate policy; and instability in emerging markets still weigh on the South Korean economy that relies a lot on exports.
Outbound shipments sank 11.2 percent in April due to a sharp drop in shipments of autos, fl at displays and petroleum products, accelerating the declining pace from a 8.1 percent drop in March. Industrial output, which is closely linked to exports, fell 1.5 percent in March due to the sluggish semiconductor sector, while the manufacturing capacity utilization rate stayed low at 73.2 percent.
“Domestic demand has been in an upside mode supported by fi scal policies and improved business sentiment, but the private sector’s momentum is still weak, along with external pressure like a protracted global slump,” the report said. The ministry also vowed to keep close tabs on fi nancial and currency markets, and economic trends at home and abroad to be ready for any necessary action.

<Source: KITA>


Domestic securities firms’’ overseas business shrinks

The number of Korean securities fi rms’ overseas subsidiaries, branches and liaison offi ces continued to decrease last year, government data recently showed. According to the Financial Supervisory Service (FSS), Korean brokerage houses were operating in 12 countries through 56 subsidiaries and branches, and 19 liaison offi ces at the end of last year. The number of their foreign offi ces has been decreasing since March 2012 when they had 93 in 14 countries.
The data showed that the securities fi rms could turn to profi t if they reduced the number of their overseas business networks. In 2011, the companies’ overseas offi ces posted a $93.8 million net loss and managed to register a $16.7 million surplus in 2014 when they reduced their overseas subsidiaries and offi ces to 80. Last year, the companies recorded $23.9 million in net profi t, up $7.2 million from a year earlier.
The FSS said their overseas earnings increased for a second consecutive year in 2015, but the amount accounts for a mere 1 percent of their overall net profi t. The aggregate assets of the securities companies’ overseas businesses came to $2.01 billion at the end of last year, up 12.4 percent from a year earlier. Shareholders’ equity also rose 10.4% to $1.53 billion during the same period.
“Securities companies have made profi ts based on a successful localization in other countries,” the FSS said. “In particular, some big securities companies have actively expanded their businesses into Asian emerging markets by increasing capital or acquiring local companies.” Most of their overseas businesses were concentrated in Asia with 44 subsidiaries and branches, and 19 offi ces. China had the most offi ces with 20, followed by Hong Kong with 15 and Vietnam with 9.

Korea’’s ICT exports dip 14.3% in April

South Korea’s exports of information communication technology (ICT) goods dropped 14.3 percent in March due mainly to a continued slump in sales of semiconductors and displays, government data recently showed.
ICT exports reached $12.53 billion in April, down from $14.62 billion a year ago, according to the data compiled by the Ministry of Trade, Industry and Energy. Exports of ICT goods accounted for 30.5 percent of the country’s $41.05 billion worth of overall shipments abroad over the cited period.
South Korea’s overall exports have been in a deep slump for 20 straight months, posting an 11.2-percent on-year drop in April.
Imports of foreign ICT products also fell 4.9 percent on-year to $7.27 billion in March, with the country logging a surplus of $5.26 billion in the sector. The trade ministry recently said weak exports of display panels and semiconductors led the decline due to an oversupply and fl accid demand in the sectors.
Shipments of fl at screens sank 27.6 percent on-year to $2.13 billion and those of chips slid 11.8 percent on-year to $4.55 billion over the period. Overseas sales of mobile phones also contracted 7.9 percent to $2.15 billion on the waning impact of new smartphones releases. By region, shipments to China and Japan plunged 18.9 percent and 50.9 percent on-year, respectively, while those to the United States jumped 25.3 percent, the data showed.

<Source: KITA> | Blog Magazine of korean electronics, brands and Goods

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