South Korean consumer confidence fell to a three-month low in December, as concern the political outlook in the North will worsen in the wake of Kim Jong Il’s death compounds the risk from Europe’s debt crisis.
The sentiment index fell to 99, from 103 in November, the Bank of Korea said in an e-mailed statement today. A reading below 100 indicates pessimists outnumber optimists. The survey was conducted between Dec. 14 and Dec. 21. North Korea announced the death of its leader on Dec. 19, with his son Kim Jong Un, thought to be under 30, to succeed as ruler.
Policy makers in the South pledged to take steps as needed to stabilize markets in the aftermath of the North’s announcement, and an initial slump in equities was recouped within days. While the government said Dec. 21 that South Korea had so far seen little impact to its economy, Asia’s fourth largest, any sign of prolonged impact to consumer spending may spur monetary and fiscal stimulus, economist Kong Dong Rak said.
“We don’t know what will happen in North Korea and this makes people so wary,” said Kong, a fixed-income analyst at Taurus Investment & Securities Co. in Seoul. “Both the central bank and government may have to come up with stimulus if consumers and companies reduce spending in fear of worse things in North Korea or Europe.”
The consumer confidence index is based on survey responses from 2,042 households in 56 cities.
Asian Stocks
South Korea’s benchmark Kospi Index (KOSPI) of stocks, which dropped 3.4 percent on Dec. 19, the day reports emerged of Kim’s death, was little changed at 9:49 a.m. in Seoul today. The won gained 0.2 percent to 1,153.10 a dollar, after falling 1.4 percent on Dec. 19.
Asian stocks were little changed amid slow holiday trading after the South Korean confidence report and the Bank of Japan said downside risks to the economy had increased in November. The MSCI Asia Pacific Index added less than 0.1 percent. The measure is headed for a 17 percent decline this year, its biggest annual loss since 2008.
A “few” Bank of Japan board members said financial-market turmoil from the European debt crisis and the yen’s appreciation were increasing risks for growth, according to a record of last month’s board meeting.
Those members “pointed to the possibility that downside risks to the economy had increased somewhat since the previous meeting” held in October, according to minutes of the Nov. 15- 16 gathering published today in Tokyo. The BOJ refrained from altering policy at the time, and also kept its asset purchases and benchmark interest rate unchanged this month.
China Profits
Today’s report didn’t specify how many people shared that view and members in the record aren’t identified by name. The central bank last week lowered its economic assessment for a second month at its December board meeting.
Elsewhere in Asia, China is due to release a report on November industrial profits today. Last month’s report showed corporate profit growth slowing on waning export demand from Europe. Industrial companies’ net income rose 12.5 percent in October from a year earlier, less than half the 27 percent pace from January to September.
In the day ahead, Finland is scheduled to release consumer and business confidence reports for December, while the Netherlands will release producer confidence data. In the U.S., the Conference Board’s consumer confidence index may increase to 58.6 in December, according to the median of 61 estimates ahead of a release today.
To contact the reporter on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net
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