North Asia economies took gradual steps to ease mobility restrictions
North Asia economies, Korea, Taiwan and Hong Kong have all moved to a relatively easier mobility restriction protocol in early May, given less new COVID-19 cases were confirmed in these economies since mid-April. For example, Korea started to ease the "social distancing campaign" on 6th May and Hong Kong has reopened a series of services and public facilities.
Further clustering and adopting "data dependent strategy" in reopening
Korea reported new clustering following the lower alert level. It reported many more cases in 1H of May compared to that from 2H of April. The government has postponed the reopening of schools by another week given the increased new cases number. In addition, some schools decided to re-close again after reopening on the 20th May. The increases of new cases in mid-May also attributed to Hong Kong's decision to postpone the removal of public gathering constraint. Looking ahead, we believe governments in North Asia will continue to follow such "data dependent strategy" to attempt a balance between containment and reopening.
UBS Evidence Lab data show significant improvements in domestic activity
The UBS Evidence Lab COVID-19 foot traffic monitor shows that residents have been "going out" since fewer new cases were reported and governments took gradual steps to ease mobility constraints. The "pull backs" in "going out" after more new cases reported suggest still high degree of public caution and "data-dependent behaviour" in resuming daily activity. Similarly, the UBS Evidence Lab Global Traffic Congestion Monitor and Public Transit Network Traffic Monitor both showed clear trends of domestic traffic flow improvements. North Asia's domestic traffic flows are in a relatively stronger position compared to many other economies. Interestingly, Seoul's traffic speed has already slowed down to close to last year's level.
External demand condition remains rather challenging overall
May's first 20-days export shipment data from Korea shows another slump, suggesting the overall external demand condition still remained challenging into the middle of 2Q2020. External demand is likely to be the key drag to North Asia growth in 2Q, as other economies are still at a relatively early stage in reopening the economy from the large scale lockdowns.
Tech export has been outperforming
It is worth noting that, the shipments of Korea's DRAM (Memories) stood out to be rather resilient in the first 20-days of May, and their falls in the past months have been much more modest compared to other items. Similarly, Taiwan's exports also showed that the tech exports are holding up better than the non-tech exports. Given the re-escalation of US- China tension and further technology restrictions, North Asia's tech export performance is probably one of the most important areas worth particular attention in the coming months.