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  Korea Report - July 2022
  Author : Hwang & Co     Date : 22-08-06 15:42     Hit : 1218    
   Korea Report - July 2022.pdf (495.0K), Down : 3, 2022-08-06 15:42:16

 

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KOREA REPORT - JULY 2022.

 

TOP ISSUES.

 

SKorean economy is feared to slow down, as inflationary pressure has mounted and export growth could lose steam amid deteriorating external economic conditions, finance ministry said on 20th. Market volatility and global economic downside risks further increased, led by Federal Reserve's fast rate hikes, China's economic slowdown, and protracted war between Russia and Ukraine. Concerns about stagflation have increased due to heightened external economic uncertainty. Inflationary pressure has rapidly built up, as crude oil and commodity prices have soared and continued supply chain disruptions. Recovery in demand from pandemic also pushed up price pressure.

 

IMF revised down its prediction on gross domestic product growth of Korea by 0.2% to 2.3%, citing global inflationary pressure, slowdown of Chinas economy and the war between Ukraine and Russia. It drastically revised its forecast on 2023 growth of Korea down to 2.1%, from its earlier suggestion of 2.9%.

 

SKorea posted trade deficit of $4.6 bil in July, in the wake of noteworthy decline in exports to China as well as spiraling import prices of raw materials, with cumulative deficit for first seven months of the year hitting the highest in 66 years. This marked first time since 2008 that Korea has recorded a trade deficit for four consecutive months. Exports came to $60.7 bil in July, up 9.4% on-year. Imports surged by 21.8% on-year to hit record-high of $65.3 bil. Outbound shipments of petroleum products increased by 67.2% on-year, vessels by 29.2%, automobiles by 25.3% and secondary batteries by 11.8%. Imports of wheat and corn increased by 29.1% and 47.6%.

 

Chaebol groups in SKorea are looking to rethink their ambitious investment plans that were announced earlier this year as fears of global recession are clouding their business outlook. According to industry sources on 18th, SK hynix recently delayed decision on its KW4 tril ($3 bil) expansion plan for local production facilities. It had planned to build new plant, called M17, in Cheongju, North Chungcheong Province, with construction set to start early next year with completion by 2025. Read more

 

PERFORMANCE OF SECOND QUARTER

 

Samsung Electronics (SEC) floated an idea of investing $192.1 bil to build 11 more chip plants in the US over next two decades, documents filed with state of Texas showed on 22nd. SEC is seeking tax breaks for potential construction of 11 new chip fabrication facilities in the state, nine in Taylor and two in Austin. SEC already has a giant chip plant in Austin, while it is building a $17 bil plant in the nearby Taylor.

 

SK Group Chairman Chey Tae-won on 26th announced its new $22 bil investment plan in the US in his meeting with President Biden at the White House. Biden in return touted SKs multi-billion dollar commitment as one of the most significant investments ever seen in the US. All this means that SK will invest in nearly $30 bil going forward, expanding on our recent announcement of $7 bil investment in EV batteries, Chey told Biden. In Oct last year, Chey announced plans to invest combined $52 bil into the US by 2030.

 

SKorea's foreign reserves came to $438.61 bil as of end July, up $330 mil on-month, thanks to increased operation profits and expanded deposits in foreign currency. Securities were valued at $391.85 bil, down $3.42 bil on-month, accounting for 89.3% of total foreign reserves. SKorea was world's ninth-largest holder of foreign reserves as of end June.

 

SKorea's consumer prices soared 6.3% on-year in July, marking sharpest on-year increase since Nov 1998, due to high energy and food prices, raising expectations that the central bank will continue to raise policy rate to tame inflation. Prices of agricultural, livestock and fisheries goods rose 7.1% on-year and vegetable prices jumped 25.9% amid frequent rains and heat waves. Core inflation climbed 3.9% on-year in July.

 

Global shipyards were awarded with newbuilds of 21.48 mil cgt, down 30% on-year, for the first half of 2022. Korea was awarded 9.94 mil cgt (184 units, 46%), while China won 9.26 mil cgt (335 units, 43%). Coming in third was Japan with new orders of 1.54 mil cgt (55 units, 7%). Korea won 63 of 89 LNG carriers (over 140K cbm each), boasting its excellent technology in the sector, in Jan-June period.

 

Three shipbuilding affiliates of KSOE, HHI, HSHI and HMD secured newbuilding contracts worth $14.02 bil during Jan-June period, up 9.6% on-year. Read more

 

DSME announced on 23rd that it has completed ship launching works for a 300K VLCC, which had been suspended since June 18th against backdrop of a strike by subcontracted workers, at its No 1 Dock. Vessel will be delivered after some finishing work and sea trial. DSME's subcontractors went on a strike on June 2nd demanding pay raise, bonus payment, union activity guarantee, etc. In particular, from June 22nd, they occupied the work site of No 1 Dock. Read more

 

K-SURE plans to support financing worth $880 mil for the Swiss Mediterranean Shipping Companys green containerships project participating in HHSI. This project is 15,600 teu LNG-powered container ship export contract worth $1.1 bil ($180 mil per ship, total of 6 ships). Vessels will be delivered to MSC in 2024. Three global investment banks such as BNP Paribas, Santander, and CAIXA are to lend funds to MSC, with mid-to long-term export insurance supported by K-SURE as collateral.

 

 

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