South Korea posted its best GDP print in awhile last week:
South Korea’s economy grew the most
in more than two years, on stronger government spending and
private consumption even as a slowdown in China clouds the
Gross domestic product rose 1.1 percent in April-to-June
from the previous quarter when it rose 0.8 percent, the Bank of
Korea said today in a statement in Seoul. That was above the
median 0.8 percent estimate of 13 economists surveyed by
Bloomberg News. From a year earlier, Asia’s fourth-largest
economy expanded 2.3 percent.
Let's take a look at the underlying data from the South Korean Central Bank's GDP release:
Consumer spending increased at its strongest rate since 1Q12, posting a 1% increase. This is the second strongest growth rate in the last 10 quarters. A big reason for this increase was the 2.4% increase in government spending -- which is the direct result of recent stimulus moves by the government. While investment was down, it was still positive. And exports also printed a decent number -- although the slowdown in China is obviously having an impact. As noted the the Bloomberg article above:
Slower growth in China is “a major risk” to South Korea’s
outlook, given Korea’s manufacturing sector has significant
trade and investment exposure to the world’s second-biggest
economy, said Ma Tieying, an economist at Singapore-based DBS
Group Holdings Ltd. The preliminary China Purchasing Managers’
Index fell to 47.7 in July from 48.2 in June, further below the
level of 50 that separates contraction from expansion, HSBC
Holdings Plc and Markit Economics said yesterday.
Let's take a look at the ETF:
Over the last year and three months, the South Korean market has done a perfect, round-trip route. Notice that on the sell-off we see a great deal of discipline -- there isn't a great crash, but instead a very measured move lower. This tells us there is simply a bit more bearish sentiment in the SK market right now, but it certainly isn't an overwhelming, bar the door sell off.