Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
You can access both of our platforms from a single Saxo account.
South Korean Exports a Harbinger of Pain
Summary: Delivering a blow to those still waiting for the 2H recovery, data released today showed South Korean exports heading toward their lowest level since the financial crisis of 2008. This could be a harbinger of pain ahead in Asian trade data and the SOX index which is hovering around all time highs.
South Korean exports of information and communication technology products have been falling for 10 straight months and it looks like September will be added to that streak.
South Korea’s trade data is released before other global trade data so is a good indicator of more negativity across Asian export data to unfold throughout September, as the lagged effect of September’s tariff hikes takes effect and the global economy has continued to slow, buffeted by cyclical headwinds and a fragile geopolitical backdrop.
But more worryingly South Korean data is typically a good lead on the global economy and global demand given that its industries are heavily integrated within the global supply chain and highly cyclical. It is for this reason that South Korean data is often used in global macro leading indicator models and expectations of future earnings growth and world trade growth, so this latest round of ugly trade data tempers any optimistic notion of a recovery in tech demand and global demand being around the corner. So, this data spells more trouble ahead.
For the first 20 days of September:
- exports down 21.8% y/y
- imports down 11.1% y/y
- exports to China down 29.8%
- exports Semiconductors down -39.8%
South Korea is distinctly vulnerable as the trade war, China slowdown, downturn in the electronic cycle and dispute with Japan weigh on economic activity along with the broad-based slowdown visible across the whole of Asia. But also, South Korea is heavily reliant on USD funding in a world where dollar liquidity is tight which only exacerbates the other issues, meaning South Korean GDP growth will remain hampered and the KRW pressured.
The prolonged weakness in chip demand and cyclical downturn in electronics, evidenced by exports of Semiconductors continuing to fall sliding 40% Y/Y for the first 20 days of September, is a stark divergence with the Philadelphia Stock Exchange Semiconductor Index (SOX) hovering around all-time highs. Particularly once you factor in the continued pressure on DRAM prices from July this year. Many companies in the market have been stockpiling inventory and holding off production cuts in the hope that this current slowdown is temporary, but this data doesn’t back that up and in that respect, it looks like the SOX index is hardly reflecting reality.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer