Languishing Korean exports remained a cause of concern in Q1

It is observed that construction business alone has accounted significantly for Korea's Q1 growth. But net exports still stood behind which is led by the weak spot in their specialized business. LCDs and automobiles exports are failed contribute. We are looking ahead to more optimistic performance in international trade in Q2 although the BoK recently came up with its growth forecast of 3.1% against previous 3.4%.

Their business of global semiconductor equipment book-to-bill ratio, which tends to lead Korea's activity by three to four months, jumped to a nine-month high of 1.10 times in March. As leading indicators putting forward an inflexion point for activity that is suggesting that Asia's electronics manufacturers are investing in plant and machinery again. While the concerns about narrowing spread between US and Korean interest rates are still lingering in money markets.

The advance estimate of Q1 GDP showed expansion of 0.8% qoq (Q4: 0.3%; Q3: 0.8%), above the consensus forecast of 0.6%. On an annualized basis, growth accelerated to 3.1% qoq (Q4: 1.1%; Q3: 3.2%), while on a yoy basis growth slowed moderately to 2.4% yoy (Q4: 2.7%; Q3: 3.3%) - the slowest since Q1 2013. Growth in Q1 was led by a strong pickup in construction investment, in particular residential building investment, reflecting the ongoing property market recovery. Private consumption also improved, growing at 0.8% qoq (Q4: 0.3%) on the back of increased spending on durables and services.

The KRW's appreciation historically associated with Fed rate hikes, along with Korea's large current account surplus is now likely to counter any capital outflows. On spot USD/KRW is currently trading at 1082.70, daily RSI curve nearing midway to oversold area. It is better to accumulate any directional positions for better confirmation. So, wisely a trade idea is to stay neutral in this type of non-directional situations.