Korea's October payback likely

Korea's IS ratio for electronics and autos also stays elevated. Overall, September activity indicators were stronger due to pre-shipments and pre-production ahead of the Chuseok holidays and China's October Golden Week. This suggests that there could be some offsetting payback seen in October. 

However, beyond October, there are some positive factors seen that could sustain production in the last two months of Q4: 1) stronger demand in the US for consumer electronics as the start of year-end festive demand is approached 2) the gradual destocking of inventories; and 3) a ramp up in 3D memory chip output by Korean companies in China. 

"Another factor of support was the post-MERS recovery in the growth of services output, which rose 3.7% y/y. This is a pace of growth consistent with pre-MERS levels, helped partly by the steady recovery in visitor arrivals in Q3. If anything, services growth is likely to stabilize above 3% in Q4", says Barclays.

All in, the broader trend remains unchanged. The stronger pickup in Q3 GDP supported by resurgent September IP and export volume partly reflects payback for softness in Q2 (0.3% q/q sa).

"The stronger activity indicators increase the risk of a further delay to this forecast for a 25bp policy rate cut at the 12 November meeting. There are two key risks seen to this forecast: 1) whether the BoJ eases further at its policy meeting later today; and 2) if October exports continues to surprise us stronger", opines Barclays. 

Regardless, with the base case that export (value) remains on a soft footing, it is likely that a much weaker KRW bias may be needed.