The bellwether for global trade continues to send warning signals to markets

South Korea’s economy contracts at its fastest pace since Q4 2008 in the first quarter of this year


If you’re wondering why South Korea is seen as a bellwether for global trade, it is because data from the country tends to be released among the earliest in developed markets and also the fact that South Korea is a key link in global supply chains. Hence, that makes economic data releases from the country a precursor for what markets should expect of the health of the global economy.

Although a slowdown in global economic conditions in Q1 is very much something markets are getting used to by now, April data for South Korea isn’t faring much better. 20-day exports data show a decline of nearly 9% compared to exports in April last year, as global demand continues to show further signs of weakness. In March, the 20-day exports data only declined by 5% year-on-year.

With exports demand still waning to begin Q2, there’s no doubt this will translate to similar sentiment across other major economies as well. I still believe markets are a bit too complacent in reacting to the global economic landscape for the time being as the impending US-China trade deal and better earnings results are blindsiding market participants from the fact that the health of the global economy is still deteriorating.

I reckon this will be a key theme to watch out for in 2H 2019 especially if the much hoped and much awaited global economic rebound is seen to falter.

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