Korea exports plummeted 6.2%

And imports dropped by 9.8% resulting to ballooning surplus for August.

According to Nomura, export declines in August were broad-based and year-to-date export growth turned negative. Exports (USD customs basis) fell by 6.2% y-o-y in August after an 8.8% decline in July. Imports declined by 9.8% y-o-y in August, resulting in a USD2.0bn surplus for the month.

Here's more from Nomura:

We now expect exports to fall by 2.0% in 2012 after the 19.0% gain in 2011, the first outright decline since 2009. Typhoon and a labour strike in the automobile sector partly contributed to the August exports drop, but we believe the main reason for the continued export slump, not only in Korea but also elsewhere in Asia, is a synchronized slowdown in external demand, led by the Euro area.

Given our outlook for a very modest global economic recovery, we now believe Korea‟s exports will continue to decline until
November, which should translate into a 2.0% annual decline in exports in 2012. If this occurs, 2012 would be the fourth
year in Korea‟s history where there was an outright decline in nominal export value.

As exports should remain weak, we expect further fiscal and monetary supports to help the domestic economy. The government will likely unveil other stimulus measures in addition to the already announced KRW8.5trn (0.7% of GDP) worth of stimulus measures. Our baseline call is currently for the BOK to cut its policy rate again by 25bp to 2.75% in October, but we see substantial risks that it could cut rates in September and by a larger amount.