Boston, MA -- (ReleaseWire) -- 01/07/2014 -- We reiterate our cautious expectations towards South Korea's economic growth prospects, this time from a sectoral perspective. Korean semiconductor manufacturers will have to constantly innovate and invest in R&D in order to maintain its competitive edge and fend off competition from the Chinese or risk taking the route of the Japanese tech sector. Additionally, we highlight a possible stagnation in the Korean petrochemical industry and a reversal in the shipbuilding industry as additionally downside risks.
South Korea's consensus-beating real GDP growth in Q3 2013 gave cause for optimism in the country's economic growth trajectory. Despite this, however, we remain cautious towards its economic growth trajectory given the structural weakness that we believe will continue to plague the Korean economy (see 'Staying Cautious In 2014 Despite Upside Growth Surprise', October 31 2013). In this article, we articulate the same convictions we have from a sectoral perspective, and highlight three industries we believe may potentially carry some near to medium term downside risk for South Korea's economic growth prospects. The Korean shipbuilding industry appears to be going through a revival in fortunes, at least for now. The country's three largest shipbuilders have seen their order books swell while Maersk Line (the world's largest container shipping line) has called the bottom of the trade cycle. The surge in 'smart money' inflows into the global shipping industry also reflects the positive sentiment that has been emanating from the industry, while the recovery in the Baltic Dry Index (BDI) - that measures the cost of transporting a range of dry-bulk commodities - has added further weight.
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Headline Industry Data
- 2014 tonnage throughput at the port of Busan forecast to increase by 7.27%.
- 2014 tonnage throughput at the port of Incheon forecast to grow by 1.70%.
- Container throughput at the port of Busan is set to rise by 5.40% in 2014, while the port of Incheon is predicted to see a 7.70% increase.
- The total value of South Korea's trade (imports plus exports) is set to enjoy real growth of 3.75% in 2014.
Key Industry Trends
Cameroon Iron Ore Story Entices South Korea: South Korea's US$220mn investment to rebuild the port of Limbe in Cameroon is a positive development for both countries, we believe. South Korea is commodity-hungry; Cameroon is rich in minerals and provides a transit point for exported oil produced in neighbouring landlocked countries Chad and Niger. Work on the port will start in June 2014 and will be completed in 2018.
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