Securities Industry, "April's Perceived Economic Slowdown Intensifies... Possibility of Q1 'Earnings Shock'"

[Asia Economy Reporter Oh Joo-yeon] Due to the impact of the novel coronavirus infection (COVID-19), South Korea's exports in March slightly decreased compared to the previous year, but evaluations suggest that the performance was better than initially feared. However, attention is drawn to analyses predicting that from April onwards, the release of rapidly deteriorating economic indicators from major countries will lead to a significant contraction in the perceived economy.

On the 1st, Kwon Ah-min, a researcher at NH Investment & Securities, diagnosed, "A slowdown in export indicators to the US and EU is expected as COVID-19 cases began to surge sharply from the end of March."

On the same day, the Ministry of Trade, Industry and Energy announced that March exports were recorded at $46.91 billion, a 0.2% decrease compared to the same period last year. Imports amounted to $41.87 billion, down 0.3%. The prevailing assessment is that the impact was limited compared to the initial concerns that exports would sharply contract due to the spread of COVID-19.

Researcher Kwon interpreted, "Considering the reduced daily average export decline (February -11.9% → March -6.4%), the increase in export growth rate to the US, and the positive turnaround in export growth rate to the EU, it is judged that the performance was better than expected despite the impact of COVID-19."

However, the problem starts from April. Looking at March exports by region, exports to China reduced their decline from -6.7% in February to -5.8% in March, and exports to the US and EU increased by 17.3% and 10.0% respectively, showing favorable performance. Although the US and EU maintained positive export growth in March, limiting the decline in exports from the previous month, it is expected that exports will be affected going forward as these two regions began to experience the full impact of COVID-19.

Meanwhile, securities firms are lowering their forecasts, suggesting that the earnings decline of domestic companies in the first quarter of this year may be greater than market expectations.

KB Securities predicted on the same day that the operating profit of domestic listed companies in the first quarter would decrease by 27.7% compared to the previous year. They also noted the possibility of an earnings shock.

KB Securities expects that in the first quarter of this year, domestic listed companies' sales will be 29.7 trillion won, operating profit 19.2 trillion won, and net profit 11.5 trillion won, representing decreases of 1.6%, 27.7%, and 41.6% respectively compared to the first quarter of last year. The market consensus anticipates sales to increase by 2.3% year-on-year, while operating profit and net profit are expected to decrease by 10.6% and 16.4% respectively, indicating a high likelihood of an earnings shock.

Researcher Lee Eun-taek of KB Securities stated, "The real economy issue will depend on how COVID-19 is alleviated," adding, "Whether the stock market follows the best-case scenario or the worst-case scenario will become clearer after mid-April."

This content was produced with the assistance of AI translation services.