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UPDATE 2-S.Korea's June exports suggest trade on mend

Published 07/01/2009, 02:06 AM
BAC
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(Recasts, adds global perspective)

* South Korea's June exports fall, but less than expected

* Data suggests exports rising strongly month on month

* Figures underline strong rebound in Asia trade in Q2

* Exports given boost by cheaper currency

By Yoo Choonsik and Seo Eun-kyung

SEOUL, July 1 (Reuters) - South Korea's exports in June fell much less than expected from a year earlier and other gauges of its shipments showed healthy monthly growth, reinforcing the view that Asia's trade bounced back strongly in the second quarter.

Analysts said there were signs global trade could continue to improve in coming months from the low levels it reached earlier this year, although any recovery in the world economy would be slow.

As the first major Asian economy to report trade figures each month, South Korea provides the first clues on the state of global trade, which slumped after the collapse of Lehman Brothers sent world markets into a tail spin.

Its June exports fell 11.3 percent from a year earlier, the Ministry of Knowledge Economy said on Wednesday. But that was much smaller than a decline of 18.1 percent forecast in a Reuters poll of analysts. It was also the smallest decline since October.

For a graphic on South Korean exports, double-click: http://graphics.thomsonreuters.com/079/KR_EXP0709.jpg

The value of shipments per working day -- widely used as an indicator of monthly performance -- jumped to $1.40 billion, a rise of more than 9 percent over May's $1.28 billion.

Economists said the exports, which one calculated had risen from the previous month by a whopping 17.2 percent on a seasonally adjusted basis, reflected the benefits of coordinated stimulus packages worldwide and some signs suggested further improvements.

"The OECD leading index in year-on-year terms already turned around in March, suggesting that there is a good chance the actual global demand would turn around in the second half," said Kwon Young-sun, a senior Korea economist at Nomura International based in Hong Kong.

Indeed, economists at JPMorgan Chase expect a booming second quarter for emerging Asia compared with the first quarter, which many analysts say marked the low point of the global downturn.

They have revised up their expectations for emerging Asia's growth in the second quarter to a seasonally adjusted, annualised rate of more than 10 percent. They estimate manufacturing output has surged 35 percent on a similar basis.

"The main reason for the revisions is that Asian manufacturing output has boomed....in good part because of a surge in exports and because companies are liquidating inventory at a less rapid pace," they said in a June 30 report. "Inventory dynamics and a brighter forecast for the U.S. and Europe suggest upside risk to Asian forecasts for 3Q as well."

South Korea's Ministry of Knowledge Economy said the country's exports by volume returned to pre-crisis levels in April, led by steel, electric and electronic products. Prices remain lower though.

China and the United States together buy around a third of South Korea's exports, of which electric and electronic products account for about half.

The country's exports have in part been supported by a cheap won, which hit an 11-year low in March. It was nearly 30 percent cheaper on average in the first half of this year against the dollar over the same 2008 period, Reuters calculation shows.

The latest trade report came after official data this week showed that factory output rose more than expected and capital investment surged in May. Confidence among manufacturers also jumped.

Economists at several global investment banks have said in research notes they are upgrading their forecasts for Asia's fourth-largest economy based on recent data.

Economists at Bank of America-Merrill Lynch and Nomura International raised their forecasts for South Korea's 2009 economic growth, while an ING economist said the country could post the strongest economic growth in 21 years in the quarter to June. (Editing by Neil Fullick)

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