Korea: Fourth Quarter 2024 GDP up Just 0.1 Percent yet the Worst Seems to Be over

Economic

Summary:

South Korea grew by 0.1% quarter-on-quarter seasonally adjusted in fourth quarter 2024 (vs. 0.1% in the third quarter, market consensus 0.2%).

Net exports made a positive contribution to the economy, while domestic growth remain subdued. Both consumer and business sentiment indices have risen, and we believe that at least the worst of the domestic political uncertainty has passed, but the aftermath is likely to weigh on any meaningful recovery in the near term.

Construction was the main drag on overall growth

By expenditure type, private and government spending contributed positively to the growth in fourth quarter 2024. Private consumption growth decelerated to 0.2% (vs 0.5% in 3Q24), probably due to a sharp decline in December, while government consumption grew 0.5% on the back of increasing healthcare insurance payments. On the investment side, as expected, construction investment (-3.2%) contracted for the third consecutive quarter in 4Q24, which was one of the main reasons for the sluggish growth. Meanwhile, facility investment rose 1.6%, mainly due to strong semiconductor investment. On the external demand side, exports rebounded to 0.3% (vs -0.2% in 3Q24) with solid IT exports, but imports contracted 0.1% with falling car and crude oil imports.

Net exports contributed positively on overall growth

Thankful to see that consumer sentiment hasn’t worsened in January

Korean consumer sentiment index rebounded to 91.2 in January after a sharp fall in December. As the national mourning period ended in early January and while the political situation has not worsened significantly in January, consumers appeared to be somewhat relieved. Of the six sub-components, the outlook indicators rebounded the most, suggesting that the economy may be bottoming out. However, the headline index remains well below its neutral level, thus the recovery is likely to be quite mediocre. There was no significant change in inflation expectations, which edged down to 2.8% from the previous month’s 2.9%.

Consumer sentiment recovered but only marginally so

Korea: Fourth Quarter 2024 GDP up Just 0.1 Percent yet the Worst Seems to Be over_2

Business confidence outlook recovered, driven mainly by the manufacturing sector

The Composite business sentiment index in all industries for Korea was down by 1.4 points from December while that for the outlook rose by 2.5 points. Confidence in the manufacturing sector recovered more strongly than in the non-manufacturing sector. Presumably, the non-manufacturing sector has been hit harder by the current domestic situation, so the recovery is likely to be rather limited. On the other hand, manufacturing confidence has recovered to levels close to those before the declaration of martial law. Despite the possibility of rising trade tensions, production and new orders have improved. We should monitor more closely how the weak KRW and the tariff issue will play out in the future, but for now, firms expressed an improved outlook compared to the previous month.

The outlook of business survey rebounded in January

Korea: Fourth Quarter 2024 GDP up Just 0.1 Percent yet the Worst Seems to Be over_3

Bank of Korea watch

Domestic growth remained weak in fourth quarter 2024 and the recovery is likely to be only gradual in the current quarter and thus we expect the BoK to provide more policy support in the coming months. Overall sentiment hasn't deteriorated further, but the recovery has been rather limited. Also, the recent KRW movement is more supportive for the BoK’s expected cut in February.

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Warren Takunda

Economic

Asian shares were mixed on Thursday after China rolled out more moves to try to boost its lagging stock markets by raising confidence that prices will rise.

Officials in Beijing said pension funds and mutual funds would be required to increase purchases of shares, to guarantee that market value rises. Listed companies will also be encouraged to do more stock buybacks and raise dividends to improve shareholder returns, the head of the China Securities Regulatory Commission, Wu Qing told reporters.

Share prices in Shanghai bounced higher, closing up 0.5% at 3,230.16. Hong Kong’s Hang Seng dropped after initial gains, losing 0.5% to 19,670.15.

“The relief over Donald Trump not announcing new tariffs on China during his inauguration didn’t last long,” Ipek Ozkardeskaya of Swissquote Bank said in a commentary, noting the U.S. president’s comment that he still plans new 10% tariffs on imports of Chinese goods. With buying enthusiasm weak, “the shooting star pattern of today hints that sentiment remains bearish for Chinese equities,” she wrote.

In Tokyo, the Nikkei 225 index gained 0.8% to 39,958.87, helped by gains in technology shares, including those of SoftBank Group Corp. It is investing heavily in Stargate, a joint venture the White House has announced will start building out data centers and the electricity generation needed for the further development of artificial intelligence.

The partnership formed by Oracle, OpenAI and SoftBank is due to invest up to $500 billion. SoftBank’s shares rose 5.1% on Thursday in Tokyo trading after jumping 11% the day before.

Elsewhere in Asia, the S&P/ASX 200 in Australia fell 0.6% to 8,378.70, while the Kospi in Seoul lost 1.2% to 2,515.49.

India’s Sensex rose 0.4% while the SET in Bangkok shed 0.4%.

On Wednesday, Netflix, Oracle and other big technology stocks lifted Wall Street Wednesday as their profits pile higher and excitement builds around the moneymaking prospects of AI

The S&P 500 rose 0.6% to 6,086.37, close to its all-time closing high set early last month. The Dow Jones Industrial Average added 0.3% to 44,156.73, and the Nasdaq composite climbed 1.3% to 20,009.34.

The gains came even though most U.S. stocks fell under the weight of higher Treasury yields.

The smaller stocks in the Russell 2000 index lost 0.6%, for example, and roughly two out of every three stocks in the S&P 500 sank. But gains for big, influential stocks were more than enough to make up for it.

Netflix jumped 9.7% after it said live events like football games and a Mike Tyson-Jake Paul fight helped it add nearly 19 million subscribers during the latest quarter.

The streaming giant joined a lengthening list of companies that have topped analysts’ profit expectations for the end of 2024. Such results support their stock prices and counteract the downward push they’ve felt from rising Treasury yields, which can peel investors away from stocks.

The rise in yields, caused in part by worries about stubborn inflation and the U.S. government’s swelling debt, had knocked down stocks and halted the record-breaking run that had carried them through 2024, at least briefly.

Travelers climbed 3.2% after also topping analysts’ expectations for profit in the latest quarter. The insurer said gains for its investments and growth in net written premiums helped it overcome losses created by Hurricane Milton, which plowed into Florida’s Gulf coast in October, and other catastrophes.

Some of the market’s most forceful pushes upward came from AI-related companies. Oracle added 6.8% and Nvidia, the company whose chips are powering much of the move into AI, rose 4.4%.

In the cryptocurrency market, where prices have surged on hopes President Donald Trump will make Washington friendlier to the industry, bitcoin was sitting just above $102,000, according to CoinDesk. It had set a record above $109,000 on Monday.

Some sourness is lingering after Trump and his wife launched meme coins, which critics said looked like an unseemly cash grab.

In other dealings early Thursday, U.S. benchmark crude oil shed 37 cents to $75.07 per barrel. Brent crude, the international standard, lost 36 cents to $78.64 per barrel.

The dollar rose to 156.59 Japanese yen from 156.43 yen. The euro fell to $1.0403 from $1.0411.

Source: AP

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Glendon

Political

WASHINGTON (Jan 23): US President Donald Trump will speak remotely at the World Economic Forum (WEF) on Thursday in Davos, Switzerland, delivering his first major speech to global business and political leaders.

Trump is due to give a speech and engage in a dialogue at 11am Eastern time (1600 GMT), according to the meeting schedule. It is not clear what he will discuss.

Trump's nationalist instincts have been on full display since he took office on Monday.

The newly inaugurated president has moved quickly to crack down on immigration, expand domestic energy production, and has threatened to impose steep tariffs on the European Union (EU), China, Mexico and Canada.

Trump has also withdrawn the United States from the World Health Organization (WHO) and the Paris climate agreement. He says he will rename the Gulf of Mexico as the Gulf of America, though other countries may not adopt the new name. He has also threatened to take back the Panama Canal from Panama.

He has pardoned more than 1,500 supporters who attacked the US Capitol on Jan. 6, 2021, in an unsuccessful effort to overturn his 2020 election loss, drawing outrage from lawmakers and police whose lives were at put at risk.

Trump is moving to dismantle diversity programmes within the US government, and is pressuring the private sector to do so as well. That has left some in Davos searching for new words to describe workplace practices that they say are essential to their businesses.

Source: Theedgemarkets

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Warren Takunda

Stocks

London stocks were set to fall at the open on Thursday as investors mulled a deterioration in consumer confidence.

The FTSE 100 was called to open down around 35 points.

A survey released earlier showed that UK consumer sentiment has weakened to fresh lows, as the new year got off to a sluggish start.

According to the latest consumer sentiment monitor from the British Retail Consortium, expectations for the next three months have softened across a number of areas.

The personal finance situation dropped to -4 in January, down one point on December, while the state of the economy eased to -34 from -27.

Respondents also signalled they intended to spend less now the festive season was over. Personal spending on retail fell to -9 from -3, while spending overall declined to 4 from 11.

In contrast, expectations for personal saving in the current quarter increased to -3 from -5 a month earlier.

Helen Dickinson, chief executive of the BRC, said: "As the government warns of tough times ahead, it is little surprise that the public have caught the January blues.

"Concerns [are] most pronounced among older generations. Gen Z (18-to-27 year olds) remain the only group to expect the economy to improve, while two thirds of 60-to-78 year olds expect things to get worse.

"Expectations of retail spending and wider spending both fell significantly, though much of this is likely to be at the end of the Christmas period, as people tightened their belts for the new year."

In corporate news, clothing retailer Primark is now targeting low-single digit sales growth in fiscal 2025 after warmer autumn weather and cautious consumers dented UK revenues in the 16 weeks to January 4.

The company, owned by Associated British Foods, said it continued to expect adjusted operating profit margin to remain broadly in line with last year's level, as gross margins continued to improve and good cost management offset inflation and the step-up in investment.

In the UK, sales declined 4% with like-for-like sales down 6.4%.

Precision instruments supplier Spectris said it expects to beat market expectations with its 2024 results.

In a brief trading update, the company said its fourth-quarter performance was in line with expectations, but strong “operational execution” meant that adjusted operating profit for the year will be above the upper end of analysts’ forecasts, which range from £183.3m to £201m, though still down from the £262.5m earned in 2023.

Harbour Energy reported significantly higher revenue of $6.1bn for 2024 in an update, driven by a 40% increase in production following the completion of the Wintershall Dea acquisition, although post-tax income was expected to be impacted by non-cash accounting charges related to changes in the UK fiscal regime.

For 2025, Harbour said it anticipated materially higher production of 450,000 to 475,000 barrels of oil equivalent per day and lower unit operating costs, with estimated free cash flow of $1bn based on current commodity price assumptions.

Source: Sharecast

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ING

Economic

We expect the Riksbank to cut rates twice more, including once this month

Sentiment indicators – be it consumer confidence, the purchasing managers indices, or the economic tendency survey – have shown steady improvement through 2024. The housing market is rebounding too. Remember that Sweden has a particularly high prevalence of variable-rate lending, which means that rate hikes hit more quickly than in countries, notably the US, where fixed-rate debt is more common. The same is true in reverse, and the swift delivery of rate cuts has boosted transactions, confidence and prices.

So far, that's not been widely reflected in the hard economic data. Unemployment is no longer rising but remains relatively high, settling structurally above the pre-Covid average. Household consumption bounced in November, though it's too early to say that this is the start of a trend.

In short, while the Riksbank is expecting a recovery in demand this year, it's still early days. Meanwhile, inflation has continued its recent tendency to undershoot Riksbank forecasts. CPIF excluding energy came in at 2% in December, below the Riksbank's most recent projection.

Add in the risks from US President Donald Trump’s trade war for Sweden’s relatively export-orientated economy, and we think there’s scope for both a cut next week and one more this year, ultimately taking the policy rate to 2%, slightly below the Riksbank’s forecast for the year.

Unemployment remains elevated

Sweden’s Riksbank Rate Cut Cycle Nears Its End as Economy Shows Signs of Life_1

Is a weaker SEK that undesirable?

Both historical and implied EUR/SEK have continued to plummet to 2021 levels, with markets struggling to find a catalyst for divergence. One reason is the relatively similar conclusions for the impact of US tariffs – where the krona would just follow the euro in depreciating against the dollar as it has done for the past couple of months. The other reason is that both the Riksbank and European Central Bank have conveyed a sense of predictability around the next policy moves.

Markets are pricing in around 20bp for this meeting, and we therefore see some upside potential for EUR/SEK next week and some signs of life in volatility. More importantly, the lingering uncertainty around global trade should keep the Riksbank leaning dovish. That should allow markets greater flexibility to price in additional cuts in Sweden based on the direction of Trump’s protectionism.

The Riksbank spent the past two years lamenting a weak currency, but the decline in inflation, focus on growth and risks of a shock to exports may well make the Riksbank more tolerant of fresh SEK depreciation.

All in all, we see some upside risks for EUR/SEK, which we could see move back to 11.60 on the back of greater market volatility in the first weeks of Trump’s presidency.

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Cohen

Economic

While maintaining balanced relations with Russia and China, the five states strengthened ties with Azerbaijan, Turkiye and the EU through major infrastructure initiatives like the Middle Corridor. Even amid domestic political challenges, Central Asian leaders are successfully navigating complex geopolitical currents while advancing economic integration.

In 2024, Central Asia enjoyed economic growth and avoided conflicts despite the ongoing war in nearby Ukraine. The year was characterised by frequent meetings of the five presidents in the now-established C5 pattern and by positive developments to improve East–West connectivity, with the European Union, China and multilateral development banks promising infrastructure funding for the Middle Corridor.

Political and economic cooperation in Central Asia intensified in 2024, especially in transport, trade and agriculture. The Asian Development Bank’s September 2024 Asian Development Outlook forecast GDP growth of 3.6 per cent in Kazakhstan, 6.3 per cent in the Kyrgyz Republic, 6.5 per cent in Tajikistan, 6.5 per cent in Turkmenistan and 6.0 per cent in Uzbekistan for 2024. Inflation was forecast between 5 and 10 per cent.

In 2024, regional diplomacy centred on the sixth annual Consultative Meeting of Heads of State of Central Asia, held in Astana in August. The annual Shanghai Cooperation Organisation summit was also held in Astana on 3–4 July. Bilateral C5+1 meetings included meetings with Indian Prime Minister Narendra Modi in January, Japan’s then-prime minister Fumio Kishida in August and German Chancellor Olaf Scholz in September. As UK foreign minister, David Cameron visited all five countries plus Mongolia in April.

Chinese President Xi Jinping visited Kazakhstan in July for the fifth time since 2012 — making Kazakhstan second only to Russia as the most visited destination on Xi’s presidential travels — where he reasserted support for Kazakhstan’s territorial integrity. President Xi went on to Dushanbe, where he highlighted the deepening relations between China and Tajikistan. On 30 March, senior ministers from the C5 and China launched the secretariat of the China–Central Asia cooperation mechanism in Xi’an.

Russian President Vladimir Putin also visited Central Asia, including a rare personal visit to Turkmenistan. But the sense is that Central Asia is exhibiting greater confidence as a middle power region. Neighbours remain powerful but Russia’s status as chief partner continues to diminish.

The head of state making the most visits to Central Asia was Azerbaijan’s President Ilham Aliyev. Addressing the C5 Summit in August 2024, Aliyev claimed it was his sixteenth visit to Central Asia since 2022. Azerbaijan has been cooperating especially with Kazakhstan and Uzbekistan in organising digital, pipeline and other cross-Caspian Sea links.

Closer relations with Azerbaijan are part of the Organization of Turkic States’ rebranding from a cultural association to a political, economic and security bloc. The Organization of Turkic States is composed of Turkiye, Azerbaijan, Kazakhstan, the Kyrgyz Republic and Uzbekistan as full members and Hungary, Turkmenistan and the Turkish Republic of Northern Cyprus as observers.

Central Asia’s most high-profile connections with Azerbaijan and Turkiye have been associated with the Middle Corridor rail link between Europe and China, which must pass through Azerbaijan if Russia and Iran are to be avoided. The European Bank for Reconstruction and Development estimated in 2023 that the total cost of improving infrastructure would be €18.5 billion (US$18.9 billion), investment sorely needed to improve the Central Trans-Caspian Network.

In 2024, the European Union took the lead in promising funding, organising stakeholder meetings and preparing feasibility studies for the key infrastructure projects in Central Asia. The World Bank, Asian Development Bank, Asian Infrastructure Investment Bank, Islamic Development Bank and various specialised agencies also worked on providing financial and technical assistance.

Since Russia’s invasion of Ukraine, China had been reluctant to actively promote the Middle Corridor routes, but this changed in 2024. Chinese investment in Georgia’s Anaklia deep sea port, the 27 December launch of the Kashi–Andijan railway, the China Railway Container Transport Corporation joining the Middle Corridor Multimodal joint venture and the revival of China–Afghanistan freight services all point to a more proactive position.

China has been especially active in Tajikistan, where fears of debt dependence have been expressed. Tajikistan’s domestic political situation was dominated after mid-2024 by an alleged coup, followed by a series of high-profile arrests. Some commentators question whether this was a genuine coup attempt or simply President Emomali Rahmon removing potential opponents to the presidential succession of his son, Rustam Emomali.

In December 2024, Tajikistan received a financing boost for the Rogun Dam when the World Bank approved a US$350 million grant. This was followed by a US$270 million loan from the Asian Infrastructure Investment Bank and a US$100 million Kuwaiti credit line. The economic benefits from the dam remain contested.

In the Kyrgyz Republic, there were reports of assassination attempts against President Sadyr Japarov and the head of the State Committee for National Security. The President dismissed prime minister Akylbek Japarov in December. Whether his dismissal was due to his corruption or due to his fight against corruption remains unclear.

Financing of the Kyrgyz portion of the Kashi–Andijan railway remained unclear in 2024, though some reports suggested the government was willing to accept a Chinese loan of US$2.35 billion to pay for the construction. The Kyrgyz Republic concluded an agreement with Kazakhstan and Uzbekistan to jointly finance the construction of the Kambarata dam. Estimated to cost US$5–6 billion, it will be the biggest dam in the Kyrgyz Republic and will help to address water management issues in the three countries.

The overall impression from 2024 is that Central Asian leaders are providing solid economic leadership and managing to balance political relationships with Russia, China, Europe and Turkiye amid potential instability in Afghanistan, Iran and Ukraine. In 2024, regional cooperation steadily improved and Central Asian economies were stable, two positive developments expected to continue in 2025.

Source：Eastasiaforum

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Michelle

Economic

Forex

The EUR/JPY cross extends the rally to near 163.05 during the early European trading hours on Thursday. The uptick of the cross is bolstered by the risk-on mood in the financial markets. Investors will closely monitor the Bank of Japan (BoJ) interest rate decision on Friday for fresh catalysts.

Traders have priced in a nearly 90% possibility that the Japanese central bank will raise interest rates from 0.25% to 0.50% at the end of the January 23-24 meeting, which would be the highest since the 2008 global financial crisis.

Technically, EUR/JPY keeps the bullish vibe on the 4-hour chart as the cross is well-supported above the key 100-period Exponential Moving Average (EMA). The upward momentum is supported by the Relative Strength Index (RSI), which stands above the midline near 58.05, indicating that the further upside looks favorable.

The first upside barrier for EUR/JPY emerges near 163.55, the upper boundary of the Bollinger Band. The next potential resistance level is seen at the 164.00 psychological level. Further north, the next hurdle to watch is 164.55, the high of January 5.

On the flip side, the initial support level for the cross is located at 162.32, the high of January 20. Any follow-through selling below the mentioned level could see a drop to 161.87, the 100-period EMA. The next contention level is seen at 160.96, the low of January 21.

Source: FXSTREET

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Korea: Fourth Quarter 2024 GDP up Just 0.1 Percent yet the Worst Seems to Be over

Construction was the main drag on overall growth

Net exports contributed positively on overall growth

Thankful to see that consumer sentiment hasn’t worsened in January

Consumer sentiment recovered but only marginally so

Business confidence outlook recovered, driven mainly by the manufacturing sector

The outlook of business survey rebounded in January

Bank of Korea watch

Stock Market Today: Asian Shares Mixed After China Rolls Out Market-Boosting Measures

Source: AP

Trump to Remotely Address Business, Political Leaders at Davos Forum, Topics Unclear

Source: Theedgemarkets

London Pre-Open: Stocks Seen Lower as Consumer Confidence Drops

Source: Sharecast

Sweden’s Riksbank Rate Cut Cycle Nears Its End as Economy Shows Signs of Life

We expect the Riksbank to cut rates twice more, including once this month

Unemployment remains elevated

Is a weaker SEK that undesirable?

Power Shifts and Progress in Central Asia

Source：Eastasiaforum

EUR/JPY Price Forecast: The Cross Keeps Bullish Vibe Above 163.00 Ahead of Boj Rate Decision

Source: FXSTREET

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