The industrial production growth came down in April from +3.28%YoY to +1.68%YoY, far below my expectation(+5.7%YoY), but the data did little for the Korean fixed income market. Unexpectedly weak semiconductor production(-0.7%YoY) was a drag on the headline data while the rest showed a expected growth rate. With demands for semiconductors remaining high as shown in recent Korean exports data(+63.3%YoY in May), the production slowdown in April was due to equipment replacement for several semiconductor producers. It suggests that investors should not worry about the production cut to repeat.
Hence, I expect industrial production in May to improve significantly compared to previous month(1.9%MoM, +0.6%YoY), helped by a rebound in semiconductor production. The risks are now tilted toward upside given lower-than-expected data for last month. However, the market is less sensitive to the domestic data for now as investors are focusing on the DM central banks turning away from extreme dovish stance. Conditions for the domestic factor driven market are not yet in place.
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