Korean exports dropped by 13.8% in December, which came in way below than consensus expectations to drop by 11.7%, following one time vessel delivery in November.

This data marked weakest annual performance of exports in level terms since 2010, with the exports declining by 7.9% yoy in 2015. Exports gave back most of the November gains, on a seasonally adjusted basis, dropping by 4.1% mom sa.

Crude oil stayed as a main pullback, as the lower prices depressed shipment value for the full year. Nonetheless, the weak external demand also pulled back the headline rate lower. Exports dropped 3.4% year on year excluding the oil related headwinds.

The lacking demand problem was exacerbated by the much slower inventory clearance. Indeed the inventory shipment ratio signals no improvement, being higher to 1.29x in the month of November.

The extended period of inventory overhang amid sluggish external demand continues to hurt manufacturers' confidence, in the absence of a meaningful festive season lift. 

"All in, we believe the broad trend of weak external demand but stronger domestic services activity is unchanged. The softness in trade and production is also likely to keep the BoK's monetary stance accommodative in 2016", says Barclays in a research note.