SKorean January exports disappoint, China a worry

South Korean exports in January fell at the fastest monthly pace in a year, reinforcing investor fears that the recovery in demand is moderating and may be hit by China's crackdown on credit growth.

Asia's fourth-largest economy shipped an average of $1.38bn worth of goods abroad every working day in January, down 8.6 per cent from $1.51bn in December. It was the sharpest monthly fall since January last year.

Exports to China for the first 20 days of January- an indicator of monthly changes -were about 6 per cent higher than during the same period in December, Reuters calculations based on government data showed on Monday.

Analysts have said China's move to rein in credit growth would hurt exports to the neighbour, which absorbs more than a quarter of South Korea's exports. However, the 20-day data suggested exports have not yet taken hit from China's tightening.

"Lending controls in China and India may dampen export growth momentum, although the impact would not be severe," Goh You-sun, an economist at Daewoo Securities.

Total South Korean exports in January rose 47 per cent from a year earlier, the ministry said, below market expectations in a Reuters poll for a 52 per cent gain from the height of the worst global downturn in decades.

South Korea is Asia's first big exporting economy to report trade figures each month, giving clues on the state of world trade.

"(After) removing the base effect, export growth is slowing down. Exports will only grow by around 10 per cent from a year ago when we enter the second half," Goh said.

IMPACT FROM CHINESE, INDIAN POLICY EYED

Private consumption generates more than half of South Korea's $930bn economy but it relies heavily on performance at such exporters as Samsung Electronics, Hyundai Motor and Hyundai Heavy Industries.

A deputy minister at the Ministry of Knowledge Economy, Lee Dong-geun, told reporters China's recent move to cool domestic credit growth had little impact on exports but added any stronger policy could eventually hurt exports.

Seoul markets showed muted reaction, though the won fell about 1 per cent against the dollar as the weak data added to heightened risk aversion among traders after US stock losses last week.

China and India, fast-growing economies that have helped the global economy recover from its worst downturn in several decades, both recently lifted reserve requirements on banks to rein in domestic credit growth.

Imports in January rose 26.7 per cent from a year earlier, slightly more than expected, on the back of a recovering domestic demand and as the colder-than-usual weather lifted imports of fuel energy, the ministry said in a statement.

The stronger-than-expected imports against disappointing exports pushed the country's trade balance into the first deficit in a year of $0.47bn, although the ministry said later the balance would return to a surplus in February.

In contrast to the disappointing export data, a private survey showed activity in South Korea's manufacturing sector expanded by the fastest pace in more than two years in January on the back of robust growth in foreign orders.