From gloom and doom just eight months ago to figures showing the strongest quarterly economic growth in seven years on Tuesday, South Korea is on a roll.
Indeed, the country sums up the much over-used term, “rollercoaster economy”. Just look at Korea’s benchmark Kospi index, which rose a further 1 per cent on Monday for a total increase of 47 per cent this year — that’s after dropping by 41 per cent in 2008.
Stephen Jen, at Bluegold Capital Management, thinks Korea is looking good, saying in his latest note to clients that Korea’s headline Q3 annual growth rate of 0.4 per cent, while significantly beating expectations, “does not adequately convey the impressiveness” of the country’s growth momentum.
Jen continues:
Converted into Q/Q SAAR terms to make it comparable with growth data for other countries, Korea expanded by 12.3% in Q3! This outcome is consistent with the view that the global economy is healing, led by emerging markets.
So why would the Korean won not appreciate, Jen asks?
The other thing to watch for is a rise in South Korean interest rates. Having signalled earlier this month that they felt it was premature to start raising rates — despite intense speculation to the contrary — policymakers in Seoul may be reconsidering, if things keep going the way they are.
Related link:
No exit for South Korea – FT Alphaville
Emerging market asset bubble unlikely to burst soon – Reuters