South Korea's exports in January declined 18.6% y/y, much lower than Barclays forecast of a decline of 12% and consensus expectation of a decline of 10.3%. This is the weakest exports data since August 2009. On a monthly seasonally adjusted basis, exports dropped 7.2% after contracting 4.4% in December.

The main factors for the decline in exports are dropping oil prices and fewer working days. Other factors also led to fall in exports. Decline in shipments of vessel and autos subtracted 3.3pp and 2.5pp respectively from the headline. The weakness in exports was worsened by the snowstorm-induced disruptions to shipment across the US and north Asia. Lastly, the continuous weakness in exports indicates towards a more worrying structural trend of weaker import demand from China.

"Given that Korea is a key source of Chinese imports, particularly for semiconductors, we expect the trend to continue to exert a downward drag on Korea's exports. All in, the decline in January exports is consistent with our view that weak trend in external-oriented sector is likely to extend into 2016, which will likely to keep the BoK's monetary stance accommodative", says Barclays.