Boston, MA -- (SBWIRE) -- 11/13/2013 -- In line with our expectations, the initial concerns about the impact of so-called 'Abenomics' on South Korea's economy have proven to be unfounded. Factors other than exchange rate valuations have enabled South Korea to maintain its export competitiveness and, by extension, the country's freight industry has not been too badly affected. Additionally, South Korea has in recent years been a beneficiary of the structural deficiencies faced by the Japanese economy.

We believe that any concerns towards the implications of Abenomics on South Korea should centre aroundon the structural reforms that Japan is hoping to undertake. The similarities both countries share in their industrial structures mean that any structural improvements that Japan makes may work to South Korea's disadvantage.

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That said, South Korea does stand out as particularly vulnerable from a regional perspective in terms of relative performance, as we head into the final quarter of 2013. Aside from the obvious China susceptibility, the country faces myriad domestic problems, particularly in terms of over-indebtedness. Corporate balance sheets are in a poor state, and the Korean consumer is the most highly leveraged in Asia. As the export machine continues to stall, the prospects of a spike in bad debt and a seize-up in domestic demand cannot be ignored. Our bearish real GDP growth forecast of 2.6% in 2013, therefore, faces substantial downside risks.

Moreover, our core conviction of a China slowdown is well underway and appears to be progressively intensifying, which would consequently place further weight on demand for Korean exports, thus being detrimental to South Korea's freight industry.

Headline Industry Data

- 2013 air freight tonnage throughput forecast to increase 1.91%.
- 2013 rail freight tonnage throughput forecast to grow 1.67%.
- Total trade (imports plus exports) in real terms is set to grow 3.05% in 2013.
- The Port of Busan will see gross tonnage growth increase 6.80% in 2013.
- The Port of Incheon is forecast to see gross tonnage growth of 1.12% in 2013.

Key Industry Trends

Three Countries To Launch Online Cargo Tracking: An online cargo tracking system to be used by Japan, China and South Korea is to come online by end-March 2014, reported Nikkei in July 2013. The online cargo tracking system has been designed to enable exporters and importers to track their cargos at major ports. The system will primarily include five ports in Japan, including Tokyo and Kobe; Busan and two other ports in South Korea; and four ports in China, including Shanghai. The new system will also allow firms to quickly know about key delays in parts imports.

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