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Supply Lines: Asia on the mend

Supply Lines

A trifecta of regional economic numbers helps explain the upbeat mood in global financial markets even as the pandemic worsens.

South Korea on Tuesday said its exports returned to growth last month, led by gains in major markets such as the U.S. and the European Union. Another key barometer of its trade — daily average exports — rose by the most since 2018.

Meanwhile, the Bank of Korea said its exit last quarter from the coronavirus recession was stronger than initially estimated, and IHS Markit's purchasing managers' index for South Korea hit the highest point since 2011.

The latest readings reinforce views that South Korea would emerge from the pandemic in better shape than most developed nations, and that's good news for the world economy. From Samsung to Hyundai are embedded in global supply chains and their collective performance in exports is often seen as a bellwether of the global economy.

In fact, PMI numbers from South Korea's neighbors suggest upward momentum across the region. China's Caixin Media PMI for manufacturing soared to a decade-high last month and Japan saw the best reading since last year. Taiwan rose to the highest since 2018.

A big reason these countries are winning the race for recovery has to do with their manufacturing prowess. For South Korea in particular, its ability to withstand the economic impact of the pandemic relies heavily on the strength of its tech exports — the demand for which soared along with the scale of lockdowns this year.

Still, risks to the recovery persist, especially as the coronavirus rages on, prompting authorities to consider reintroducing lockdowns. It's also unclear when the world will start widely benefiting from vaccines and seeing confidence restored.

"Heading into 2021, we expect the economic recovery to continue to vary widely across the region, with China, Taiwan and Vietnam outperforming others," wrote Priyanka Kishore, an economist at Oxford Economics. "That said, the global resurgence of the virus, among other factors, is likely to dampen the pace of improvement, until a vaccine is widely available."

Sam Kim in Seoul

Charted Territory

World trade is set to continue recovering slowly, rising on average by around 4.25% a year in 2021-22, after declining by more than 10% in 2020, according to the OECD's latest forecast. The weak recovery in investment — a trade-intensive component of demand — and the likelihood that containment measures will continue to weigh on international travel and tourism both contribute to the modest rebound in overall trade, it said. The OECD also cut its 2021 global growth forecast to 4.2% as the resurgence of the coronavirus dramatically weakened the global recovery.

Today's Must Reads

  • Unfair fight | China's economic offensive against Australia is partly designed to warn countries against vocally opposing Beijing's interests, particularly with Joe Biden looking to unite U.S. allies. Yet it's already showing signs of backfiring.
  • Final stretch | Politicians from the European Union and the U.K. say a post-Brexit trade deal could be struck this week, even as they put the onus on each other to make the final concessions. Separately, a report showed manufacturing in Britain expanded at the fastest pace since 2017.
  • West to east | China has overtaken the U.S. as the top foreign market for companies across Asia-Pacific, according to a new survey from HSBC that underscored several ways the pandemic is accelerating tectonic shifts in the global economy.
  • Europe's enforcer | Amazon is working to avoid Google's fate with EU Antitrust regulators and trying to address enforcers' concerns before the legal process goes too far.
  • Cooling a currency | Recent measures from the Bank of Thailand that aim to restrain the surging baht will likely be followed by "further strict" steps, but policy makers are unlikely to impose outright capital controls, the country's finance minister said.
  • Can't trust that day | Online shoppers in the U.S. probably spent up to $11.4 billion on Cyber Monday, according to a revised estimate, indicating consumers responded to deals from retailers that enticed them to begin shopping before the annual event.

On the Bloomberg Terminal

  • Export orders | The consensus-beating surge in the Caixin manufacturing Purchasing Managers' Index in November signals strong support for China's economy from external demand, with the reading indicating the fastest expansion in 10 years.
  • Holiday hangover | North American spot-trucking relative demand dropped 18% sequentially in the week ended Nov. 27, based on's Market Demand Index. 
  • Use the AHOY function to track global commodities trade flows.
  • Click HERE for automated stories about supply chains.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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