March balance-of-payments data released by the Bank of Korea on Tuesday showed that the current account of Asia’s fourth-largest economy posted a surplus of US$4.82 billion, extending its surplus streak to 83 straight months.
However, it was down 5.5% from a $5.1 billion surplus in March last year.
The trade balance posted a surplus of $8.47 billion – also a fall of 10.0% from $9.41 billion in March last year, due to weak exports including memory chips, which are stuck in a cyclical downturn.
Overall, the central bank forecasts a surplus of $66.5 billion this year with a surplus of $24.5 billion in the first half. The central bank also predicts a continued current account surplus, saying that if there is a deficit in April, it will only be a one-off.
“The current account trend is now in line with our projection,” Yang Ho-seok, who heads the Bank of Korea’s balance of payments team, told Asia Times. “The surplus will continue.”
Those damned dividends
Meanwhile, a negative view is prevailing in South Korea that the current account will post its first deficit in seven years in April. The expected culprits? Falling trade numbers and rising dividend payouts to foreign stock investors.
In a country where approximately one-third of the market is foreign-invested, dividend payments to overseas players have long been a boogeyman among Korean media and corporate pundits, which periodically ring the alarm bells.
Although Korean companies have customarily paid low dividends, there are expectations that this year’s dividends will be the largest ever due to strengthened shareholders’ rights. The latter issue soared to prominence in March when – in a decision that shocked Korea, Inc – the chairman of Korean Air was booted from his longtime board tenure at his company’s’ AGM. He subsequently died from what was reported to be a chronic illness in April.
However, a more sober view prevails at the central bank. It does not expect dividends for foreign investors to be as high as the market expected, as earnings have deteriorated since the fourth quarter of last year.
The primary income account deficit narrowed to $740 million from $1.29 billion in March last year as dividend payments to foreign direct investors decreased. The primary income account indicates the difference between income such as wages and investment income earned by Koreans abroad and earned by foreigners in Korea.
The primary income account has remained in the red in March and April as dividends are paid to foreign direct investors in March, and to foreign stock investors in April.
The primary income account deficit in April has been on the rise over the past two years as dividend payouts to foreign stock investors increased. The primary income account posted a deficit of $5.62 billion last year, following a deficit of $4.67 billion in 2017. The current account surplus hit a record low of $1.36 billion in April 2018 as the primary income account deficit widened.
According to one expert, the market consensus is that this year’s dividends to foreign stock investors will be $8.5 billion-$9 billion.
However, the BOK’s Yang called the prediction exaggerated.
“The trade account and service accounts are on-trend to improve as more foreign tourists come in, and the decrease in exports is also easing,” Yang added. “Considering all these circumstances, it is hard to say conclusively that the current account balance will suffer a deficit in April … even if it is the red, the size is not expected to be big.”
I like it when folks come together and share
views. Great website, stick with it!
Hi colleagues, how is the whole thing, and what
you wish for to say about this post, in my view its genuinely awesome for me.
Hello friends, how is the whole thing, and what you would like
to say about this post, in my view its in fact amazing designed for me.
We’re a gaggle of volunteers and starting a new scheme in our community.
Your site offered us with valuable information to work on. You’ve done a formidable process and our whole group shall be grateful
Hi it’s me, I am also visiting this website regularly,
this website is genuinely nice and the visitors
are in fact sharing good thoughts.
Hello! I just wanted to ask if you ever have any trouble with hackers?
My last blog (wordpress) was hacked and I ended up losing many months of hard work due
to no backup. Do you have any methods to prevent hackers?
I’ve been browsing online more than 2 hours today, yet I never found any interesting article like yours.
It’s pretty worth enough for me. Personally, if all site owners
and bloggers made good content as you did, the internet
will be much more useful than ever before.
Hello there! Do you use Twitter? I’d like to
follow you if that would be ok. I’m absolutely enjoying your blog
and look forward to new posts.
Hi there, this weekend is pleasant in support
of me, as this point in time i am reading this great educational
paragraph here at my home.
Wow, this paragraph is good, my sister is analyzing such things, therefore I am going to let
It’s wonderful that you are getting ideas from this article
as well as from our argument made at this time.
Great blog here! Also your website loads up fast! What host
are you using? Can I get your affiliate link to
your host? I wish my website loaded up as fast as yours lol
Leave a comment