Market forecast based on Korea’s export data

● Market forecast based on Korea’s export data

• If you look for the reasons why the domestic stock market was bad in the second half of 2024, the political risk will of course be great, but the impact of slowing exports cannot be ignored.
• The reason for the bad outlook for the domestic stock market in 2025 is also the slowdown in the export economy and the subsequent further downward concerns of companies’ earnings estimates.
• In this situation, the provisional export data for December released today showed good data to dispel concerns, so we would like to analyze the market accordingly.
• Export growth in December 2024 hit yoy +6.6%, rebounding from +1.4% in November, and was the fifth consecutive month since July when export growth slowed
• However, it is regrettable that the average daily export growth rate in December 2024 recorded yoy +1.5%, showing a slower trend compared to +6.2% in November
• However, it should be noted that the export data for December 21-31 was very surprising. The average daily export amount from December 1 to 20, 2024 was -6.7%
• Assuming that the average daily export amount of 20 days is maintained, the export amount in December 2024 was forecast to be yoy -2.0%. However, this added the export data from the 21st to the 31st, and recorded yoy +6.6%
• This December’s export data may be denigrated as a temporary surprise following a surge in the exchange rate, but the above figures are export data in dollar terms
• The export amount, which takes into account the effect of the exchange rate, rebounded sharply to +17.5% in December from +5.7% in October and +8.1% in November. We can expect a performance surprise for exporters in the fourth quarter
• The peak out of export growth for this cycle was yoy +13.9% in July 2024. The peak out of daily average export growth was yoy +16.2% in August 2024. The peak of the index in 2024 was July 11
• The export growth rate and the KOSPI growth rate have a very significant correlation trajectory
• Indexes form highs before export growth falls and indexes form lows before export growth rises
• The index growth rate forms the bottom first before the export growth rate forms the bottom
• If the export growth rate is considered negative for the first time in January, the index growth rate entered negative for the first time in December. The negative export growth rate is the first since September 2023, and the negative index growth rate is the first since May 2023
• If the current KOSPI remains at 2,400 points, the bottom of the index growth rate will naturally be July 2025 (July 2024 index high)
• Whether the index growth rate will bottom out in December 2024, the first half of 2025, or July 2025. The index rebound target for the first half of the year is 2,690 points so that July 2025 is not the bottom of the index growth rate
• The biggest impact on Korea’s exports is the electric and electronics sector, which starts with item code 85. It accounts for 30% of total exports, and electric and electronics include semiconductors, displays, home appliances, IT parts, batteries, and power devices. Semiconductors account for approximately 70% of the electric and electronics sector, which is absolute
• If semiconductor export data similar to the fourth quarter is maintained, the export growth rate of the electric and electronics sector will be lowered to a single digit from May 2025, and the overall daily average export growth rate will briefly re-enter negative territory from May to June
• The key to exports in the first half of 2025 is
  1) Whether export growth in non-electric and electronic sectors will recover
  2) Semiconductor export growth rate maintained
  3) Export growth recovery items in addition to semiconductors within electrical and electronics
  There will be three. Market leaders will be determined according to each factor
• Korea’s export data is characterized by the highest at the end of the quarters of 3, 6, 9, and December based on the average daily export amount. The average daily export amount in December is -10.2% compared to September and -3.2% compared to June
• Average daily exports in 2024 were $2.68 billion in the first quarter, $2.818 billion in the second quarter, $2.832 billion in the third quarter and $2.827 billion in the fourth quarter, showing no signs of slowing exports on a quarterly basis due to strong export data in December
• The export data for January 2025 will be key, with only 19 business days, one day less than January 2024. On the other hand, February has one more day compared to the previous year
• Assuming the average daily export amount at the average level is maintained in the fourth quarter of 2024, January 2025 is expected to hit -1.9% yoy. On the other hand, February is expected to rebound to +8.5% yoy
• There were many opinions that the time when export growth turned negative would be the bottom of the domestic market, but the negative in January is likely to have been reflected in the shelf due to strong exports in December
• January’s stock market forecast to lead index rebound for semiconductor-driven exporters
• If the trend of leading stocks in export stocks is forecasted through export growth, it will be advantageous to focus on semiconductors by April 2025, items with rising export growth momentum in electrical and electronics from May 2025, or sectors with rising export growth momentum in addition to electrical and electronics
• To explain by borrowing the opinion of Shinyoung Securities team leader Park So-yeon, the export growth rate has been negative for four months, except for semiconductors, which account for 30% of Korea’s total exports, and shipbuilding, which is caught in exports on an Indian basis
• In the meantime, the market did not believe in semiconductors amid the prospect of semiconductor exports slowing down, and as other small exports focused on increasing items, circular sales by stock appeared and the index as a whole was weak
• If you have confidence in exporting semiconductors, it means that concerns will be lifted for Korea’s overall exports and that the index can rebound
• With exports not as bad as expected, including semiconductors, and the trade surplus expanding further in December, the incentive for the won-dollar exchange rate to rise further has decreased. As team leader Park So-yeon said, I personally agree that the won-dollar exchange rate is likely to stabilize unexpectedly quickly in 2025 if the interest rate on U.S. bonds turns downward
• If the exchange rate is stable and exports are not bad