South Korea Trade and Currency Pressures

South Korea's exports and manufacturing PMI reached multi-year highs in May 2026, driven by global AI demand. However, the KRW remains persistently weak due to geopolitical risks and structural portfolio outflows.

Key Takeaways

• 1.South Korea's export growth exceeded expectations in May, surging 53.2% YoY, primarily fueled by massive demand for semiconductors and AI-related hardware.
• 2.The manufacturing sector remains in a strong expansion phase with the PMI rising to 54.8, the highest level in over five years.
• 3.The Korean won (KRW) remains weak despite a record trade surplus, driven by geopolitical risks and institutional portfolio rebalancing by the National Pension Service (NPS).

Table of Contents

• Widening trade surplus signals firm growth in 2Q26
• Export performance is proving strong not only in the chip sector but also in other sectors
• Imports up firmly amid higher energy prices and capital goods imports
• AI boom boost Korean exports to the US, ASEAN, and China
• Manufacturing PMI remains in expansion for six consecutive months
• Manufacturing PMI advanced, signalling positive outlook for growth
• Despite widening trade surplus, KRW remained quite weak
• Foreigners' net selling of KOSPI is a main reason for KRW weakness
• KRW appreciation should be gradual

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