DBS Group strategists Taimur Baig and Nathan Chow expect South Korea’s August exports to stay strong near 60% year-on-year, underpinning the outlook for the KOSPI and Korean Won (KRW) even as growth moderates from June’s peak. They also see headline and core CPI around 3%, reinforcing its view that further Bank of Korea (BoK) rate hikes are likely this year.

Exports robust, inflation reaccelerating

“August trade and inflation data will be the key focus in the week ahead. Exports are expected to remain strong at around 60% yoy in August, as inferred from the first 20 days of data (+56% yoy), resulting in a strong trade surplus of around USD30bn.”

“This should provide fundamental support for the outlook for the KOSPI and KRW. That said, export growth likely peaked at 70.4% yoy in June and is set to moderate for a second consecutive month in August, corroborating our view that the AI supercycle is approaching a peak.”

“On the prices front, headline CPI is expected to rebound to around 3% yoy in August, after temporarily moderating to 2.8% in July. Core CPI is also expected to edge up further to around 3%, converging with headline CPI.”

“This should reinforce the case for further BOK rate hikes in the remainder of the year.”

“In addition to lingering supply-side inflation pressures amid uncertainty over energy prices, demand-side inflation is expected to gradually build as consumption recovers and downstream pricing power improves.”