I WAS in South Korea for a short trip last week and it was difficult to believe that the country, like the rest of Asia, is facing serious economic difficulties when I was walking around the famed Namsan park in Seoul last weekend.

Thousands of South Koreans had congregated in the park to admire the cherry blossoms in full bloom and there was a festive mood in the air – lots of smiling faces, street performances and the ubiquitous traffic jam – as people tried to get in and out of the area.

South Koreans enjoy a fine spring day.
SOURCE: Goh Eng Yeow

It is hardly the type of scene conjured up by a serious economic crunch where people tighten their belts, streets are empty of shoppers and there is a air of hardship as the hungry forage for scraps of leftovers.

Yet, the latest data shows that South Korea is facing its worst economic contraction in a decade. Its March exports slumped by 17.1 per cent while its currency, the Korean won – a widely-used gauge of foreign investors’ confidence – plummetted to an 11-year low against the greenback

Our own set of economic data – released by the Government on Tuesday – is hardly in the pink of health either. The economy contracted by 11.5 per cent in the first quarter and is now expected to slump by between 6 and 9 per cent this year.

Yet, the local stock market took this grim news in its stride and retail investors continued to load up on penny stocks which have, so far, risen about 14 per cent this week.

It is difficult to explain the partying which is going on here and elsewhere in the region, especially when doubts had begun to beset traders on Wall Street on Tuesday night, as they awaited results from Citigroup and JPMorgan Chase at the end of the week.

Suffice to say that the relief rally has now extended to penny stocks, after the spectacular run-up in blue-chips over the past five weeks.

Most investors have set their sights so low that what they are feeling now is not shock at how bad things are, but relief that they are not getting grimmer. This is luring people to get out of the closet across the region, enjoy the crisp spring air and get on with their lives once again.

In contrast, the prognosis as recently as late February, was that the global economy was caught in a downward spiral. There also seemed to be no end to the US banking crisis in sight, after Citigroup set investors' nerves on edge by forcing sovereign funds to convert their preference shares into equity.

Over the next few months, a lot more businesses may still go bust and cause many more people to lose their jobs – as the grim economic forecast suggests. But for now, there is a perceptible sign of relief that things are not getting worse and this is luring investors back into the stock market again.

Whether this is the much vaulted green shoots of growth which economists talk about remains to be seen.

Just like the delicate cherry blossoms which could be destroyed overnight by a chill or a sudden downpour, it is too early to make the call that the worst is indeed over and the stock market is on track for a fresh bull-run.