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    A005490   KR7005490008

POSCO

(A005490)
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POSCO : S. Korea's Q2 GDP growth hits decade high but risks loom

07/26/2021 | 07:21pm EDT
FILE PHOTO: People wearing masks walk at Myeongdong shopping district amid social distancing measures to avoid the spread of the coronavirus disease (COVID-19), in Seoul

* Economy grew at fastest annual pace since Q4 2010

* S.Korea Q2 economy grew 0.7% q/q, matching forecasts

* BOK says chip shortages for car production dragged on exports

SEOUL, July 27 (Reuters) - South Korea's economy expanded at the fastest annual pace in a decade in the second quarter, thanks to a pick up in private consumption, though a resurgence of COVID-19 casts doubt over the outlook for growth for the rest of the year.

Data from the Bank of Korea on Tuesday showed gross domestic product (GDP) grew 0.7% in the second quarter, after rising 1.7% three months earlier and matching 0.7% growth tipped in a Reuters survey.

The economy surged 5.9% year-on-year, the fastest growth in a decade and up sharply from 1.9% in the first quarter, in part because of the low base effect of last year but also driven by strong exports and imports as major trading partners continued to reopen.

That, however, missed market forecast growth of 6.0% for the annual reading.

The result would be no surprise for the BOK, which is expected to be the first Asian central bank to raise interest rates from pandemic-era lows, as growth and inflation return.

But economists see the pace of growth slowing in the third quarter as the government brought in its toughest coronavirus restrictions yet to contain the worst outbreak in the country.

While exports surged 22.4% on-year, they declined 2.0% from the previous quarter and became a net drag on economic output in the second quarter, suggesting growth may plateau in the months ahead.

"We record exports in volume terms, not in terms of value, which should help explain the slight decline in exports, as export prices have been increasing quite a lot. Also, a shortage of chips for cars also dragged production," said Park Yang-su, head of statistics department at the BOK.

SK Hynix, the world's second-biggest memory chipmaker, on Tuesday reported the highest quarterly profit since the end of 2018, while Korean steelmaker POSCO posted its highest ever quarterly profit last week.

The main driver of growth in the second quarter was private consumption and government expenditure, which rose 3.5% and 3.9%, respectively, on-quarter.

Finance Minister Hong Nam-ki said in a Facebook post on Tuesday the government will soon release measures to boost consumption to help those hit by the latest virus curbs, using the 34.9 trillion won ($30.36 billion) extra budget spending earmarked for pandemic relief packages.

Still, some economists are lowering their growth projection for the country.

"Given that growth was not as strong as we had expected, we are lowering our forecast for the year as a whole to 4.3%, from 5% previously," said Alex Holmes, an economist at Capital Economics.

"We don’t think there was anything in the figures that would persuade the BOK to delay the timing of its first rate hike. We are sticking with our non-consensus view of a move in late-August." ($1 = 1,149.6500 won) (Reporting by Cynthia Kim; Editing by Sam Holmes)


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
POSCO -4.41% 346500 End-of-day quote.27.39%
SK HYNIX INC. -1.40% 105500 End-of-day quote.-10.97%
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Financials
Sales 2021 71 252 B 60,6 B 60,6 B
Net income 2021 5 563 B 4,73 B 4,73 B
Net Debt 2021 3 286 B 2,80 B 2,80 B
P/E ratio 2021 5,80x
Yield 2021 3,57%
Capitalization 26 204 B 22 333 M 22 300 M
EV / Sales 2021 0,41x
EV / Sales 2022 0,37x
Nbr of Employees 17 403
Free-Float 85,2%
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Mean consensus BUY
Number of Analysts 26
Last Close Price 346 500,00 KRW
Average target price 467 400,00 KRW
Spread / Average Target 34,9%
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Managers and Directors
Jeong-Woo Choi Co-Chief Executive Officer & Director
In-Hwa Chang Co-President, Co-CEO & Director
Jung-Son Chon Co-Chief Executive Officer & Director
Seung-Kyu Lim Senior Managing Director & Head-Finance
Seong-Wook Lee Head-Legal & Compliance Support
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