Korea ( South & North ) 01 (May 08 - Nov 10)

[winston]

Korea National Pension to Put $8.9 Billion in Stocks
By Kyung Bok Cho

July 29 (Bloomberg) -- South Korea's National Pension Service, the country's biggest investor, will buy as much as 9 trillion won ($8.9 billion) of the nation's stocks this year to boost returns, the fund's new president said.

President Park Hae Choon told reporters in Seoul today he wants to raise yields by 2 percentage points by early 2010. National Pension earned an average 6.1 percent in returns in the past three years, half that of the California Public Employees' Retirement System, the biggest U.S. public pension fund.

This year is also ``a window of opportunity to boost overseas assets'' as the U.S. subprime crisis triggered a stock slump, he said. Park, appointed last month, is the first president of National Pension to come from the private sector and was picked to speed up change at the state-run agency, the welfare ministry said at the time of his hiring.

``Our returns are much poorer than the major pension funds in other countries,'' Park said. ``The difference stems from asset allocation. We will actively increase our higher-risk assets such as stocks and alternative investments.''

National Pension will increase holdings of domestic and overseas stocks to about 40 percent of total assets by the end of 2012, while cutting the weighting of bonds to 50 percent. Bonds accounted for 78.9 percent of the fund's 230 trillion won in assets as of the end of June.

The fund will invest between 4 trillion won and 9 trillion won into South Korea's $867.7 billion of equities in the second half of 2008 ``depending on market conditions,'' Park said.

Positive Return

Calpers had more than 60 percent of assets in global equities as of the end of April, according to its Web site. This helped give it a three-year average return of 12.3 percent, according to materials provided today to reporters.

Still, bonds helped the Korean fund post a positive return for the first half of 2008 despite a 10.7 percent loss from equities, said Ohn Kisun, acting chief investment officer.

To boost holdings of overseas equities, National Pension plans to buy mostly developed-market stocks while also increasing its holdings in emerging markets such as China, India, Brazil and Russia, according to the press release.

The fund may buy stakes in global financial firms, possibly by teaming up with Asian sovereign wealth funds, Park said, declining to give more details. National Pension is also considering investing in overseas power-plant construction, resource-development projects and grains, Park said.

Woori, Korea Development Bank

The pension fund said in March it will invest $300 million in U.S. and European financial firms by participating in a fund led by TPG Inc., a U.S.-based private equity firm.

So-called alternative investments, including possible purchases of shares in state-owned South Korean banks such as Woori Finance Holdings Co. or Korea Development Bank, are projected to account for 10 percent of the fund's assets by the end of 2012, from 2.5 percent in 2007, Park said. South Korea plans to sell part of its stake in Woori this year, while Korea Development Bank's initial public offering is planned for 2009.

``The financial crisis that started with the U.S. subprime problems will persist through the end of this year,'' Park said. ``This year is going to be the right time for the fund to invest overseas. After that, the window might close.''

[kennynah]

it's back to trade surpluses and reserves in US treasury Bills... what to do but to reinvest in the US engine to ensure no dilution of money....

[kennynah]

S. Korean June Bank's Lending Rates Rise
7/30/2008 12:40 AM ET

(RTTNews) - Wednesday, the Bank of Korea said the banks' average lending rates for households and companies increased 0.06 percentage points to 7.02% in June. According to the central bank, the corporate lending rate climbed to 7.04% from 6.96%. Meanwhile, the lending rate for households eased slightly to 6.93% from 6.95%.

[kennynah]

S. Korean Forex Reserves Fall Sharply In July
8/4/2008 12:37 AM ET

(RTTNews) - Monday, the Bank of Korea reported that South Korea's foreign exchange reserves declined for the fourth consecutive month in July. Foreign exchange reserves fell US$10.58 billion to US$247.5 billion by the end of July. In June, reserves totaled US$258.1 billion.

[millionairemind]

Economy under par? Play less golf
Thu Aug 21, 2008 2:12pm EDT

(Reuters) - South Korea's President Lee Myung-bak has told officials to give up golf for the moment because it sends the wrong signal just as the economy has hit the rough.

"Golf is not bad but ... as prices are unstable and the economic situation is not getting better, President Lee thinks they need to consider public sentiment," Yonhap news agency quoted a presidential Blue House official as saying.

Lee, a keen tennis player, asked officials to put their clubs away at least in the run-up to the major local Chuseok holiday in mid-September.

His government, which began battling low popularity ratings almost as soon as it took office in February, has had to abandon ambitious economic growth targets for this year because of a global downturn, while fast-rising inflation has triggered mounting wage demands from the country's unionized labor force.

Golf is hugely popular in South Korea but the high cost sees many players fly off to cheaper parts of Asia for a game.

An average club near the capital charges $250,000 to $500,000 to join and members can expect to pay $250 per guest for a weekend round of golf.

[winston]

S Korea to draw China funds under QDII

South Korea will join a list of foreign countries in which Chinese financial services firms can invest, a regulator said in a a move that could help domestic markets and companies draw fresh foreign capital.

Jun Kwang-woo, chairman of the Financial Services Commission, said that he had signed a memorandum of understanding during a visit to China in June under which South Korea would receive China's Qualified Domestic Institutional Investor status.

He said financial cooperation with China would be addressed during Chinese President Hu Jintao's two-day visit to Seoul starting today, while South Korean officials will meet with Chinese investors in October.

Mainland firms are expected to invest in South Korean markets and companies due to be privatized.

REUTERS

[winston]

South Korea plans to cut income, property taxes

South Korea will cut income taxes, provide aid to small businesses and remove some property taxes to spur economic growth.

Income-tax rates will be lowered to between 6 percent and 33 percent by 2010 from the current range of 8 percent to 35 percent, the Ministry of Strategy and Finance said.

The government will expand tax breaks for parents who spend money on their children's education and on family medical care, according to the tax revision proposal.

Consumers, struggling with surging living costs and record debt, cut their spending last quarter for the first time in four years.

BLOOMBERG

[winston]

Korea is down 4% today and the Lyxor Korea Fund listed in Spore, is down 6%. Not vested yet.

A while back, Warren Buffett said that Korea was cheap, right ?

The cheap just got cheaper today..

I'm concerned about their declining exports to the US as well as their margins being squeezed by high oil prices..

[ishak]

S. Korea announces tax cuts
AFP, Sep 1, 2008

SOUTH Korea on Monday announced sweeping tax reforms, including income and corporate tax cuts designed to stimulate sluggish private consumption and business investment.

The Ministry of Strategy and Finance said the government would cut 20.7 trillion won (S$25.3 billion) in taxes by 2012. Including oil tax cuts announced earlier, some 26 trillion won would be slashed.

'This will help our economy make a leap forward ... and reinvigorate investment by corporations,' Finance Minister Kang Man-Soo told reporters.

The government can maintain its fiscal soundness because lower taxes will boost economic growth, he said, adding the overall system would be streamlined.

The plan, which needs parliamentary approval, comes as Asia's fourth-largest economy is showing signs of a slowdown.

Growth slowed to an annual rate of 4.8 per cent in the second quarter from 5.8 per cent in the three months to March as soaring oil prices pushed up inflation and weakened domestic demand.

In early July the finance ministry sharply trimmed its growth forecast for this year to below five per cent, saying rising oil prices and the global economic slowdown combined to pose a 'serious' threat to the local economy.

The government plans to cut income tax rates by two per cent over the next two years to ease the burden on middle-income earners.

It will also cut corporate taxes, provide tax incentives for research and development and widen exemptions on dividends paid by subsidiaries to parent companies.

Tax exemptions on capital used to build energy-efficient facilities will double to 20 per cent.

Tax burdens on capital gains from the sale of high-priced real estate will be reduced to help stimulate the sluggish construction sector.

Inheritance taxes will be lowered from a maximum 50 per cent to 33 per cent.

The government will also raise exemptions for education and medical care expenses.

The government will extend tax exemptions on investment funds to help stabilise the stock market.

The individual consumption tax imposed on heating fuel will be cut by 30 percent.

[millionairemind]

This one dunno zhun bo.... Asian Currency Crisis Act II?? Super delayed action???

Published September 2, 2008

US$7b debt may plunge Korea into a currency crisis
Market talk is that authorities are not defending won

(SINGAPORE) A seemingly insignificant event - the maturing of US$7 billion worth of foreign holdings of South Korean bonds this month - is threatening to plunge the country into a full-blown currency crisis.

The amount itself is tiny, under 3 per cent of South Korea's US$247 billion in currency reserves.

But the government debt is maturing at a crucial time. The won is already extremely weak, there is growing speculation that the Korean authorities have dropped their defence of the currency and simmering rumours that the government holds huge amounts of worthless US agency debt.

Suddenly, the issue of a small amount of maturing bonds has transcended into more complex fears about the central bank's credibility and ability to defend its currency.

As the won plunged 3 per cent to 4-year lows yesterday, it appeared the damage had already been done. The market buzz was capital flight. The stock market fell 4 per cent.

'It's not a great deal, but it is the trigger effect,' said State Street strategist Dwyfor Evans, referring to the maturing bonds. 'If people think money will be taken out of the country, it will inspire them to put on short Korea positions.

'Then there are technical levels, stop-loss levels and, before you know it, there's a momentum to the whole move driven primarily by speculation over the maturing bonds.'

But economists place the blame for letting the situation deteriorate to such an extent squarely on foreign exchange authorities, which in South Korea's case is both the finance ministry and the Bank of Korea.

Until August, their steadfast intervention had convinced market players that the won will not be allowed to decline past the 1,050 mark per US dollar at any cost.

The Bank of Korea is estimated to have spent about US$10 billion defending the won in July, and double that amount if the drop in its forward positions is also taken into account.

But, in early August, the government hinted it may not intervene that aggressively. That spurred speculators into thinking the authorities will let the won weaken, either because they want a buffer for their exports or because they are loath to spend more of their reserves.

As Korean bonds, stocks and the won tumbled yesterday, the situation was an uncomfortable reminder of the capital flight seen in the 1997-1998 Asian financial crisis when the won plunged to near 1,900 a US dollar from near 900 - losing half its value.

'They have to do what they did in early July,' said ING Bank economist Tim Condon. Nothing else but heavy-handed intervention would work at this point, he said. 'The last thing they need now is a disorderly decline in the currency. There is no upper limit on dollar/won and investors can get unnerved.'

But the reasons for the central bank's indifference to the won's decline through August remain a mystery.

The won is already Asia's weakest currency this year, having lost 16 per cent of its value against the US dollar so far.

South Korean exporters are faring relatively better than their competitors in Singapore and Taiwan, with exports expanding at a pace above 20 per cent from year-earlier levels.

Although the trade account has been widening since the start of this year, that by itself provides no justification for a run on the won.

The question then becomes how liquid the government really is.

Korea's short-term debt is high, at US$222 billion, but 40 per cent of that is debt owed by local branches of foreign banks.

There have been heavy outflows. Foreigners have sold a net US$23 billion of Korean equities this year. But the bond market remains an attractive trade for foreigners, with yields at nearly 6 per cent even at the short end.

The scary possibility that investors will flee the country in droves had not seemed real.

Until yesterday, that is, when the central bank's seeming reluctance to support the won transcended into panic-like concerns over liquidity and faith in the won.

'There doesn't seem to be any love for Korea at all at the moment,' said Mr Evans. -- Reuters