DBS Group strategists Taimur Baig and Nathan Chow project that South Korea's exports will remain robust in August, with year-on-year growth expected to stay near 60%. This outlook is based on data from the first 20 days of August, which showed a 56% year-on-year increase in exports, and is anticipated to result in a strong trade surplus of approximately USD30 billion. The strategists note that while export growth likely peaked at 70.4% year-on-year in June, it is set to moderate for a second consecutive month in August, suggesting that the AI supercycle may be nearing its peak. Despite this moderation, the strong export performance is seen as providing fundamental support for both the KOSPI and the Korean Won (KRW) [1].
On the inflation front, headline Consumer Price Index (CPI) is expected to rebound to around 3% year-on-year in August, after temporarily easing to 2.8% in July. Core CPI is also forecasted to edge up further to around 3%, aligning with the headline figure. This anticipated rise in inflation, coupled with ongoing supply-side pressures and a gradual recovery in consumption, is expected to reinforce the case for additional Bank of Korea (BoK) rate hikes later in the year. The strategists highlight that both supply-side factors, such as uncertainty over energy prices, and demand-side factors, including improved downstream pricing power, are contributing to the inflation outlook [1].
DBS emphasizes that August trade and inflation data will be key focus points in the coming week, as they will shape expectations for monetary policy and market performance. The combination of strong exports and rising inflation is seen as supportive for the KRW and KOSPI, even as export growth moderates from its recent peak [1].
CONCLUSION
DBS expects South Korea's strong export performance and rising inflation to support the KRW and KOSPI, while also increasing the likelihood of further BoK rate hikes this year. Investors are advised to monitor upcoming trade and inflation data, which will be pivotal for market direction.