Monday, March 3rd, 2008
South Korea’s Trade/CPI Paying the Price for Crude’s Sharp Rise
By Mike Caggeso
Associate Editor
The sharp rise in the price of crude oil is a key culprit for South Korea’s record imports and rising consumer prices last month.
While exports rose a boisterous 20.2% to $31.5 billion, imports leaped 27.3% to a record $32.3 billion. Crude imports alone jumped 60% to $6.2 billion last month.
It marks the third straight month the country’s trade deficit has been in the red. December was the first in 57 months the country posted negative trade numbers.
And since South Korea imports 97% of its energy needs, consumers paid the price. The consumer price index rose 3.6% last month from the previous February and a 0.4% increase from January, according to Korea’s National Statistics Office.
While prices rose almost completely across the board, transportation costs rose at the fastest rate, soaring 10.1%.
Investors Eye Export Strength
Given South Korea’s energy dependency, there was little it could do about soaring oil costs and the effect on the country’s economy.
However, South Korea’s export strength offset a potential economic imbalance, drastically improving the country’s trade deficit from $3.69 billion in January to $808 million last month.
Exports to the Association of Southeast Asian Nations - a 10-nation political and economic bloc comprised of the Philippines, Thailand, Indonesia, Malaysia, Singapore and others - rose 50.9% last month compared with the year prior.
Also, shipments to the Middle East rose 48.3%. Exports to Japan and China rose 10.1% and 6.1%, respectively.
"Despite the surge in crude oil imports, that cost $91.4 a barrel for the Dubai brand last month, increased exports of ships, machinery, processed oil products, display screens and mobile telecommunication equipment, helped reduce the size of the deficit," Oh Jung-kyu, head of the ministry’s trade and investment promotion bureau, said in a statement, the Korea Times reported.
This is great news for investors. Already in 2007, they’ve seen Korea’s stock market rise nearly 32%; faster than Singapore (17%), Australia (12%), Thailand (26%) and the Philippines (21%), according to The Associated Press. Comparatively, the blue-chip Dow Jones Industrial Average Index rose 6.77%, the tech-laden NASDAQ Composite Index gained 7.81% and the broader S&P 500 Index rose a meager 3.45%. Japan’s Nikkei 225 Index actually dropped 11%.
And Money Morning has a free South Korea investors’ portfolio that captures the country’s fast growth potential.
The report has details on South Korea’s largest bank, largest mobile phone carrier, largest steel maker and its major electric power company.
News and Related Story Links:
- Korea National Statistics Office:
Consumer Price Index for February 2008 - Korea Times:
S. Korea’s Trade Deficit Narrows in February - Associated Press:
Rollercoaster Asian stocks set to rise in 2008: analysts - Money Morning Investment Report:
Why South Korea is set to Become the Biggest Economic Story of 2008
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