Tourists leave after buying masks to prevent contracting coronavirus, at a pharmacy in the Myeong-dong in Seoul, South Korea. Image Credit: Reuters

Seoul (Reuters): South Korean exports suffered a sharper contraction in January, falling for a 14th straight month as worsening sentiment over the new coronavirus and the effect from fewer working days outweighed improving global demand for semiconductors.

Overseas sales tumbled 6.1 per cent at the first month of 2020 from a year earlier, trade ministry data showed on Saturday, worse than a 5.2 per cent drop in December but beating a median 7.8 per cent decline tipped in a Reuters poll.

Average exports per working day, however, rose 4.8 per cent on year, the first expansion in 14 months, when eliminating the calendar effect. There were only 21.5 working days in January, 2.5 days less than last year, due to changes in the Lunar New Year holiday.

South Korea’s exports are a closely watched bellwether for world trade as it is the first major exporting economy to release monthly foreign trade data.

Overseas sales of semiconductors, the country’s top export, accounting for one-fifth of its total exports, fell 3.4 per cent year-on-year, logging the smallest decline in 14 months.

The novel coronavirus’ spread across China and the globe had cast a shadow over expectations Asia’s fourth largest economy was heading for a firmer footing. Disruptions from the virus are seen knocking economic growth in China and beyond, denting demand for Korean goods.

The trade ministry said January figures showed barely any impact from the virus, but shipments may be affected from February if risks from the virus threat lingers.

On Monday, the Chinese government has extended the weeklong Lunar New Year holiday by three days to February 2 as it seeks to limit the spread of the coronavirus. The holiday, which began on January 24, had been due to end on January 30.

“Though we see exports recovery momentum on improving export prices and chip sales, exports to China are likely to have a negative impact, depending on the extent of the virus spread and whether it lasts,” said Chun Kyu-yeon, an economist at Hana Financial Investment.

Exports to China, South Korea’s biggest trading partner, fell 10.5 per cent year-on-year just a month after recording the first growth in 14 months in December.

The ministry said China-bound sales fell mainly due to the holiday comparisons, and that exports to China’s Hubei province, where the epidemic originated, accounts for only 0.3 per cent of total exports, meaning the direct impact will be limited.

Imports fell 5.3 per cent in January, better than a 6.9 per cent contraction tipped in the survey and compared to a 4.6 per cent fall in December.

That brought the month’s trade balance to a $0.62 billion surplus, the smallest in seven years and compared to a $2.02 billion surplus a month earlier.

The trade figures came a day after data showed South Korea’s factory output surged sharply and exceeded forecasts in December, as soaring chip production fuelled industrial activity.