February 1, 2019 / 12:52 AM / 17 days ago

UPDATE 2-S.Korea Jan exports fall for 2nd month as China woes dim outlook

* Exports -5.8 pct y/y (Reuters poll -7.0 pct)

* Imports -1.7 pct y/y (Reuters poll -5.3 pct)

* Trade surplus hits lowest since Feb 2014 (Adds breakdown, PMI data)

By Hayoung Choi and Cynthia Kim

SEOUL, Feb 1 (Reuters) - South Korea’s exports shrank for a second straight month in January as faltering demand in China hit prices of memory chips and petrochemical products, adding further stress on the economy from slowing global growth and the U.S.-Sino trade dispute.

Exports from Asia’s fourth-largest economy fell 5.8 percent from a year earlier, the biggest decline since September, government data showed on Friday. The outcome was better than a 7.0 percent drop forecast in a Reuters poll.

Imports fell 1.7 percent, but also less than a 5.3 percent decline predicted in the poll. That resulted in the smallest trade surplus in nearly five years, of $1.34 billion, according to the Korea Customs Service.

South Korea is anxiously watching for signs of further cooling in China, its biggest trading partner, after economic growth fell to its weakest in nearly three decades, deepening worries about Chinese demand for its chips, petrochemical products and computers this year.

“The biggest reason (for exports decline) is with price falls of memory chips and oil prices. Worsening Chinese sentiment will also affect the South Korean economy through April this year,” said Lee Seung-hoon, an economist at Meritz Securities.

Finance minister Hong Nam-Ki said on Wednesday the government plans to come up with fresh measures to support exporters in February.

“Some items including semiconductors are undergoing serious difficulties but other items seem fine. Region-wise there were declines from China but other (destinations) look okay. (Policy support) measures will cater to these (sectors,)” Hong told a news conference.

CHIPS UNDER PRESSURE

Nine of 13 top export items logged declines in January.

Exports of memory chips fell in both value and volume terms. They declined 23.3 percent in January on-year in value terms as global tech companies delayed chip purchases for inventory control purposes, the trade ministry said in a statement. In volume terms, they fell 0.7 percent in January.

Overseas sales of petrochemical products fell 4.8 percent from a year earlier amid falling global oil prices.

By destinations, exports to China shrank for a third month in a row by falling 19.1 percent, while shipments to the United States jumped 20.1 percent.

Samsung Electronics Co Ltd on Thursday warned of weaker earnings in 2019 as it posted a 29 percent drop in fourth quarter operating profit, hit by a slowdown in demand for memory chips.

As the world’s sixth-largest exporter and the first major economy to report monthly trade figures, South Korea’s trade data provides an early reading of global trade conditions. Along with other export-reliant countries, South Korean exports have been dented by the slowing Chinese economy.

South Korean factories also got off to a grim start this year as activity in January contracted at a sharp rate. New export orders - an indicator of future activity - shrank for a sixth straight month, pointing to continued pressure on shipments in coming months.

A separate government statement released earlier on Friday showed inflation stood at a one-year low of 0.8 percent in January, far softer than the central bank’s annual inflation target of 2 percent.

Subdued prices reinforce the market’s broad consensus the central bank will likely hold its policy rate steady in the near term to keep borrowing costs low amid economic uncertainties. (Editing by Jacqueline Wong)

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