South Korea’s export-driven growth hit a four-year low in the third quarter and the stock market plummeted yesterday, prompting calls for rate cuts to help it weather the global economic slowdown.
Samsung Electronics, the world’s largest memory chipmaker and flagship of the country’s biggest group, added to the gloom — reporting a 44 percent fall in third-quarter net profit and warning of tough times ahead.
Authorities in recent days have unveiled sweeping measures to stabilize jittery markets. Credit rating agencies and analysts say Asia’s fourth-largest economy does not face a re-run of the 1997-1998 meltdown.
But stock investors still seemed haunted by decade-old ghosts.
“People are in a panic,” Samsung Securities’ Kim Seong-bong told Dow Jones Newswires.
While the economy was stronger than in 1997-1998, “the experience of receiving an IMF bailout package during that time seems to be haunting investors, leading them to acquire cash but to ignore long-term valuation of corporates,” Kim said.
The KOSPI index, in line with other Asian bourses, finished sharply lower, losing 10.6 percent at 938.75 amid massive foreign selling.
Before the market opened the central bank reported GDP growth of 0.6 percent quarter-on-quarter in the July-to-September period, the lowest figure since it recorded 0.5 percent growth in the third quarter of 2004.
Year-on-year growth was 3.9 percent, the weakest since the second quarter of 2005.
“The pace of the economic slowdown is quickening,” central bank official Choi Chun-sin told reporters.
“The global financial turmoil and the economic slump hurt domestic demand and it seems that export growth is losing steam faster than expected,” Choi said.
Exports fell 1.8 percent sequentially in the third quarter afer rising 4.3 percent in the second quarter.
Samsung Electronics reported net profit of 1.22 trillion won (US$873.3 million) compared with 2.19 trillion won a year earlier.
While emerging markets generally are under pressure amid a “flight to safety” attitude, South Korea has borne the brunt of recent selling.
Analysts say this is partly because it is one of the region’s more liquid markets. But there are also doubts about the overall economy, given the exposure of top exporters to declining demand in the US and elsewhere.
On Sunday the government moved to allay one uncertainty, offering a state guarantee of up to US$100 billion on its banks’ foreign debts.
It also pumped US$30 billion into local banks facing a shortage of the greenback and then announced a multi-billion dollar package to revive the construction industry.
Moody’s Economy.com called for a cut in the key interest rate from 5 percent to 4 percent.
“Unfortunately, the worse is yet to come for Korea with growth likely to dip further in the final quarter of 2008,” senior economist Daniel Melser said.
“The state of the economy demands a rapid easing in monetary policy from the Bank of Korea,” he said.
Melser said a big fiscal stimulus package already announced by the government was also urgently needed. But much of the package was still tied up in parliament because of political wrangling.
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