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

[helios]

Ken brother,

ániang ha sa yo

i'm calling them to find out if the mentioned companies are attending a training seminar in Westin ChoSun, Seoul ... ... so gossip a little lor ... the koreans/ engineers/ finance controllers are very frank, they will tell you upfront their businesses [those dealing with engineering and cable biz] are shaky ... but the supply chain biz is extremely busy ...

[kennynah]

..... their businesses [those dealing with engineering and cable biz] are shaky ... but the supply chain biz is extremely busy ...

oh...they supply chain...jewelry or bicycle chain?

[helios]

oh...they supply chain...jewelry or bicycle chain?

gahm-sah-hahm-ni-da 감사합니다

[millionairemind]

South Korea Policy Makers Meet on Won, Stocks Slump (Update2)

By William Sim and Bomi Lim

Oct. 17 (Bloomberg) -- South Korean policy makers held an emergency summit today, seeking steps to restore confidence in the economy after the won dropped by the most since the 1997 Asian crisis and shares tumbled to a three-year low.

Standard & Poor's said today the government should consider guaranteeing banks' debts to help them overcome difficulties obtaining offshore funding. Finance Minister Kang Man Soo, central bank Governor Lee Seong Tae and Jun Kwang Woo, head of the nation's financial regulator, led the meeting at the presidential office in Seoul.
South Korea's stocks extended declines and money market rates soared to the highest in more than seven years on concern lenders will struggle to repay overseas debt, which may roil the financial system and wreck the economy's expansion. The nation's banks face a more than 50 percent chance that the global credit freeze could threaten their foreign-currency funding, S&P says.

The government may provide tax benefits to long-term share investors to help stem the Kospi's decline, Vice Finance Minister Kim Dong Soo said yesterday. The government may raise its planned spending for 2009 to bolster domestic demand, Chosun Ilbo newspaper reported today.

``We can say, as done in many other countries, a bank guarantee would definitely help restore confidence in Korea's liquidity situation,'' Kwon Jae Min, a credit analyst at S&P in Hong Kong, said today in an interview.

Countries in Europe, along with Hong Kong and Australia, have guaranteed the debt banks issue to fund lending as the financial crisis deepened, putting Korean lenders at a relative disadvantage. S&P put Kookmin Bank, the nation's largest, and six other financial firms on CreditWatch with negative implications on Oct. 15.

`Most Vulnerable'
South Korea's short-term debt is equal to 76 percent of foreign reserves, which is ``the most vulnerable in Asia'' as the nation's current-account deficit widens, Brown Brothers Harriman & Co.'s strategist Win Thin wrote in a note to clients. The ratio topped 250 percent during the 1997-98 Asian crisis.

The won fell 9.7 percent yesterday, the most since the International Monetary Fund bailed out South Korea in December 1997. The currency gained 2.3 percent today after the central bank changed rules in the foreign-exchange swap market to bolster liquidity.

``The meltdown has prompted banks not to lend even among themselves, which is in turn hitting those who are fundamentally healthy,'' said Go You Sun, an economist at Daewoo Securities Co. in Seoul. ``First of all, the government needs to provide liquidity.''

Shares Decline

The Kospi index declined 1.4 percent to 1,196.76 at x12:13 p.m. in Seoul, led by banking shares. KB Financial Group Inc., the holding company of Kookmin Bank, slumped 9 percent, extending yesterday's 15 percent tumble.

Kang Chung Won, Kookmin's chief executive officer, this week urged the government to guarantee interbank lending.

Korean lenders have $235.3 billion of foreign-currency liabilities, according to the Financial Supervisory Service.

``Korea is one of the few banking systems in Asia where domestic deposits are insufficient to fund loans,'' Moody's Investors Service said in a report on Oct. 16.

That's forced them to rely on the wholesale market for about 44 percent of their total funding, according to Moody's. International markets account for as much as 12 percent of funding for the banks, the ratings company said.

Declines in South Korea's equities and currency echo similar slumps in emerging markets worldwide as financial turmoil prompts investors to avoid assets in more risky markets.

`Irrational'

Still, South Korea's sovereign credit rating outlook is stable, Standard & Poor's said yesterday, adding it may reassess the situation if pressure on banks' liquidity and the nation's currency persist. Takahira Ogawa, a Singapore-based director of sovereign ratings at S&P, said the won's weakness is ``irrational'' given the state of South Korea's economy.

South Korea has a long-term sovereign rating of A, the sixth-highest investment grade, from Standard & Poor's. During the financial meltdown a decade ago, S&P slashed the nation's debt rating by 10 grades between October and December 1997, according to data compiled by Bloomberg.

The economy is in its 10th consecutive year of expansion, fueled largely by growth in exports to China, Europe and the Middle East. In contrast, rising living costs and record debt have crimped consumer spending, causing economic growth to slow to 4.8 percent in the second quarter from a year earlier, the weakest pace since early 2007.

The current-account deficit expanded to a record $4.71 billion in August on rising import costs. Foreign-exchange reserves fell in each of the past six months as authorities sought to stem the won's drop and provide liquidity to the financial system.

[winston]

The weak Korean Won will help their exports later.

Korea is off my radar for the time being...

[millionairemind]

Watching this closely... it could have massive ripple effects across Asia.

`KIKO' Hedges Slay Korean Exporters, Threaten Banks (Update2)

By Bomi Lim

Oct. 17 (Bloomberg) -- Taesan LCD Co., which makes back- light units for computer screens, was ranked as South Korea's third-biggest start-up in June after posting record sales.

Three months later, the supplier to Samsung Electronics Co. collapsed after accumulating 80.6 billion won ($62 million) in losses on currency options that soured as the won slumped against the dollar, according to regulatory filings. Hana Bank, Korea's fourth-largest lender, assumed the losses when Taesan failed.

Korean banks may lose billions of dollars on similar contracts and face lawsuits from exporters who say the options were sold without an explanation of the risks. The losses are exacerbating investor concerns as the credit crunch squeezes Korea's economy. The won fell 9.7 percent against the dollar yesterday, its biggest drop in 11 years, after Standard & Poor's said banks may struggle to refinance foreign currency debt.

``It was the confirmation of what we've feared all along -- that companies can actually collapse because of these options,'' said Mo Jae Sung, who helps manage the equivalent of $1 billion at Hanwha Investment Trust Management Co. in Seoul. ``It raises concerns about banks' asset quality when they are already tight on dollar liquidity.''

More than 500 Korean companies are struggling to repay KIKO, or Knock-In Knock-Out, contracts sold as a hedge against an appreciating currency. The options turned into losers as the won fell 29 percent against the dollar this year.

`Working With Clients'

An index tracking 54 financial companies fell 6.5 percent in Seoul trading to the lowest level since Sept. 5, 2005. The won rose 2.8 percent to 1,334 per dollar, paring yesterday's drop.

Taesan's losses in the first half of 2008 were seven times the company's operating profit in the period, according to the filings. Calls to Taesan weren't returned.

Kookmin Bank, Korea's largest lender; Shinhan Bank, the third-biggest; Industrial Bank of Korea, the biggest lender to small and mid-size companies; Citibank Korea Inc. and SC First Bank Korea Ltd. are among the firms that sold KIKOs, according to Korea's Financial Supervisory Service.

Hana Bank spokesman Jeong Jae Hoon declined to comment on KIKO contracts, as did spokesmen for Kookmin, Shinhan, Industrial Bank and SC First Bank.

``We are actively working with our clients to assist them during this period of unprecedented financial volatility,'' said James Griffiths, a Hong Kong-based spokesman for Citigroup.

`99 Percent Sure'

During a legislative debate yesterday, Cho Moon Hwan, a lawmaker with the ruling Grand National Party, said most contracts were written in English, meaning some buyers couldn't understand them.

``Banks didn't notify companies of potential risks at all,'' he said.

One KIKO buyer, Kim Sang In, chief executive officer of a construction-equipment maker in Hwaseong, 56 kilometers (35 miles) south of Seoul, agreed.

``Banks never, never notified us of these KIKO options' high risks,'' Kim said. ``They said they were 99 percent sure the won would continue to rise.''

Kim, who declined to give specifics about his contracts, said he's talking with 130 companies about filing a class action lawsuit against the banks that sold KIKO contracts.

The banks have denied misleading customers. In July, the Fair Trade Commission rejected complaints by KIKO buyers who alleged seven lenders were engaged in unfair trading.

`Definitely Speculating'

Shin Joong Kyung, a research fellow at Industrial Bank of Korea, says the buyers are to blame. Companies that signed KIKO deals could boost profits by selling dollars back to the banks at above market rates.

``Some of them were definitely speculating,'' Shin said. ``They weren't complaining when they were making profits.''

Under KIKO contracts, companies get a fixed exchange rate as long as the dollar trades within a set range against the won. The firms are required to pay twice the amount of the contract if the dollar appreciates beyond the range.

Exporters bought KIKOs to hedge against an expected rise in the won, which gained 8 percent against the dollar between Jan. 1 2006 and the end of 2007. A stronger won reduces earnings from exports, which account for more than half of South Korea's gross domestic product.

Hedge Turns Sour
The buyers didn't count on the currency slumping. Companies, mostly small exporters, had racked up 1.7 trillion won in KIKO losses by the end of August, when the won traded at 1,089 to the dollar, according to the Financial Services Commission. It closed at 1,373 won yesterday in Seoul after the biggest one-day rout since an International Monetary Fund bailout in December 1997.

Options losses may grow since most outstanding KIKO contracts were signed in late 2007 and early 2008, when the won traded at around 900 to the dollar. Almost 80 percent of outstanding contracts worth $7.9 billion expire by June 2009, according to the Financial Services Commission.

The regulator said on Oct. 1 that 63 companies holding $2.3 billion in KIKOs are vulnerable because they ``over-hedged,'' or bought contracts for amounts that exceeded expected income.

``The losses could amount to trillions of won,'' said Kim Tae Hwan, a general manager at the Korea Federation of Small and Medium Business. ``It's a fraud by banks, I say.''

KIKO losses are unlikely to affect S&P's ratings on Korean banks, said Kwon Jae Min, a Hong Kong-based credit analyst at the agency.

``Relative to Korean banks' total asset size or total capital, the expected loss is not that big,'' he said. ``But, we have a little question over their ability to manage risk.''

Most Korean lenders bought the products from overseas banks then resold them to local companies, leaving them liable for their clients' losses in case of bankruptcy, says Hanwha's Mo. Banks haven't disclosed the identities of counterparties.

``The question is, are these really hedging products?'' Mo said. ``How can banks sell such high-risk products and leave themselves vulnerable at the same time?''

[millionairemind]

S. Korea May Supply Extra $30 Billion, Yonhap Reports (Update3)

By Shinhye Kang

Oct. 18 (Bloomberg) -- South Korea may supply a further $30 billion to banks, companies and currency-swap markets to help bolster liquidity, Yonhap News reported, citing government officials it didn't identify.

The government is seeking to add the measure in a relief package that will be announced tomorrow, the Korean-language news agency reported.

The U.S. financial crisis is making it more difficult for companies worldwide to secure dollars as banks hoard cash to meet their future funding needs. South Korea's currency and swap markets are experiencing a dollar shortage as local businesses, which expect the U.S. currency to strengthen against the won, don't want to sell their dollars yet.

``Injecting more dollars will be good news for the whole South Korean financial market as its recent volatility came from a shortage of dollars,'' said Lee Sang Jae, senior economist at Hyundai Securities Co. ``But the measure will not fully solve problems until the U.S. financial market is stabilized.''

Under the proposal, the Bank of Korea may supply more than $10 billion in U.S. currency to the local won-dollar swap market and the state-run Export-Import Bank of Korea may provide $20 billion to banks and small businesses, Yonhap reported. The government had already promised to supply a total of $15 billion to small firms and the swap market.

1997 Bailout

The Bank of Korea said yesterday it will change rules in the foreign-exchange swap market to increase banks' access to funds. The measure helped the won, which fell 9.7 percent on Oct. 16, the most since the International Monetary Fund bailed out the country in December 1997, to rebound. South Korea's won has fallen 30 percent this year, the worst performance among Asia's 10 most-traded currencies.

South Korea may announce other measures, including guaranteeing bank debts and tax breaks for investors, to bolster confidence when the country releases a financial market stabilization package tomorrow. Finance Minister Kang Man Soo will announce it tomorrow at noon in Seoul, the ministry said today, changing the timing from an initial 2 p.m. release.

``We will take preemptive, decisive and sufficient measures,'' Kang told reporters in Gwacheon yesterday after an emergency summit among policy makers. Kang referred to the U.S. steps to inject capital into financial firms, guarantee interbank lending and expand deposit guarantees as measures Korea could consider ``if necessary.''

Bank Guarantees

The government should consider guaranteeing banks' debts, following similar moves in Australia, Europe and Hong Kong, to help lenders overcome difficulties obtaining offshore funding, Kwon Jae Min, a credit analyst at Standard & Poor's in Hong Kong said in an interview yesterday.

The government may also provide tax benefits to long-term share investors to help stem the Kospi index's decline, Vice Finance Minister Kim Dong Soo said on Oct. 16. The Kospi index dropped 2.7 percent yesterday to 1,180.67, the lowest level since October 2005.

Additionally, the country may provide won liquidity by purchasing corporate bonds, the Seoul Economic Daily reported today, citing government officials it didn't identify.

Other Asian countries may join South Korea in seeking measures to restore confidence in plunging financial markets.

Taiwan will announce tomorrow whether it will retain a narrowed limit on stock price movements, the financial regulator said in a press conference.

Price-Decline Limit

A decision to continue enforcing a limit of 3.5 percent on one-day share price declines, or restore the previous 7 percent cap, will be announced at 6 p.m. tomorrow in Taipei, Gordon Chen, chairman of the Financial Supervisory Commission, said at a press conference late last night, rebroadcast today on TV station CTi.

Taiwan doesn't let stock prices move more than 7 percent from the previous day's close. Regulators cut the downward limit in half between Oct. 13 and Oct. 17 to stabilize the market as share prices plunged because of the global financial crisis.

China's securities regulator said yesterday the government will unveil measures to stabilize the country's markets, while exhorting banks to avoid ``excessive'' financial innovation. China's benchmark stock index has plummeted 66 percent this year.

[millionairemind]

Lets watch how the Korean bond and stock market responds to this when it opens on Monday and the days ahead. These will be telling clues to how bad the situation has become.

S. Korea Backs $100 Billion in Debt to Calm Markets (Update2)

By Kyung Bok Cho and William Sim

Oct. 19 (Bloomberg) -- South Korea will guarantee $100 billion in bank debts and supply lenders with $30 billion in dollars to stabilize its financial markets.

The government will provide tax benefits for long-term equity and bond investors, while the Bank of Korea will buy repurchasing agreements and government bonds to boost won liquidity, the heads of the finance ministry, central bank and financial regulator said in a statement from Seoul. Policy makers held an emergency meeting on Oct. 17 to hammer out the plan.

South Korea is struggling with Asia's worst-performing currency, a shortage of U.S. dollars and a stock market that has lost 38 percent this year. The guarantee on bank debts comes after Standard & Poor's said last week it may cut the credit ratings of the nation's largest lenders, which triggered the worst plunge in the won since the International Monetary Fund bailed the nation out in December 1997.

``They have to do that because the market was pushing them by attacking the Korean won,'' said V. Anantha-Nageswaran, chief investment officer for Asia Pacific at Bank Julius Baer (Singapore) Ltd., part of Switzerland's biggest independent money manager for the wealthy. ``They know what the stakes are. The currency could completely careen out of proportion.''

The government and state-run lenders including Korea Development Bank will guarantee as much as $100 billion of external debt taken up by Korean banks from Oct. 20 to June 30 next year, according to today's statement. The guarantee is valid for three years.

`Allay Fears'
South Korea joins countries in Europe, along with Hong Kong and Australia, in providing state backing to banks to help fund lending amid a global financial crisis.

``We will take similar measures to avoid placing domestic banks at a comparative disadvantage in terms of overseas funding and to allay fears in the financial market,'' Finance Minister Kang Man Soo told reporters in Seoul, at a press briefing with central bank Governor Lee Seong Tae and Jun Kwang Woo, head of the Financial Services Commission.

S&P, in a report released Oct. 15, said South Korea's banks face a more than 50 percent chance the credit crunch could threaten their foreign-currency funding. Domestic lenders have $235.3 billion of foreign-currency liabilities, with about $32.7 billion due to mature in the fourth quarter, according to the Financial Supervisory Service.

Funding Loans

``Korea is one of the few banking systems in Asia where domestic deposits are insufficient to fund loans,'' Moody's Investors Service said in an Oct. 16 report. That's forced them to rely on the wholesale market for about 44 percent of their total funding, with international markets accounting for as much as 12 percent, the ratings company said.

Policy makers decided that a recapitalization of the nation's financial institutions or an expansion of deposit guarantees are ``not necessary.'' Still, the government will ``take proper actions'' should the need arise, according to the statement.

To boost the supply of U.S. dollars in the domestic market, South Korea will provide the banking industry with $30 billion from its foreign-exchange reserves, according to the statement. The government had already promised to supply a total of $15 billion to small firms and the swap market, while the Bank of Korea said on Oct. 17 it will change rules in the foreign- exchange swap market to increase banks' access to funds.

`Vicious Circle'

The U.S. financial crisis is making it more difficult for companies worldwide to secure dollars as banks hoard cash to meet their future funding needs. South Korea's currency and swap markets are experiencing a dollar shortage as local businesses, which expect the U.S. currency to strengthen against the won, don't want to sell their dollars yet.

``Providing dollar liquidity will stop the vicious circle of a shortage of dollars in banks and firms leading to a weaker won,'' said Lim Jiwon, a senior economist at JPMorgan Chase & Co. in Seoul.

Authorities will continue ``smoothing'' operations in the currency market to avoid ``extreme volatilities,'' the statement said.

To encourage long-term investing, the government will give tax benefits to investors who hold equity or corporate-bond funds for more than three years, today's statement said. The breaks include an exemption from taxes on dividends.

South Korea's benchmark Kospi stock index has lost 38 percent this year, heading for its first annual decline since 2002. The measure plunged 9.4 percent on Oct. 16, the biggest one-day fall since September 2001.

South Korea will inject 1 trillion won ($767 million) in Industrial Bank of Korea, the nation's biggest lender to small- and mid-sized businesses, by transferring its equity stakes in the state companies.

``The government has done what it can do at the moment to join global efforts to help stabilize the markets,'' said Seo Chul Soo, a fixed-income analyst at Daewoo Securities Co. in Seoul. ``More steps may be needed if the global markets remain unstable.''

[millionairemind]

I am watching Korea like a hawk... worried that we will have a Asian Crisis Redux which this time will start in Korea...

The won is in freefall against the USD and at the same range when IMF had to step in back in 98. Not good....

Published October 25, 2008

Ghost of Bear Stearns haunts Korean economy
Seoul must act boldly, show investors a crisis isn't imminent
By WILLIAM PESEK JR
BLOOMBERG COLUMNIST

SOUTH Korea has become the Bear Stearns economy. Just as excessive gloom on the part of pundits accelerated the demise of the 85-year-old investment bank, a bubble in negativity is causing a run on Korea. Bets that Asia's fourth-biggest economy is headed for a 1997-like crash risk becoming a self-fulfilling prophesy.

A key problem is that banks are again making the pre-1997 mistake of borrowing in short maturities and in foreign currencies.

This isn't a blame-the-media column. Bear Stearns Cos got in over its head with risky trades that threatened the firm with bankruptcy. There's still something to be said about how unsubstantiated rumours and speculation zooming around cyberspace hastened its collapse.

Korea isn't there yet, and there's ample reason to think it will avoid such a fate. Markets aren't so sure and Korea is under attack - even though officials in Seoul make a valid case for the economy's health.

'We are a lot better equipped than 10 years ago,' Jun Kwang Woo, chairman of Korea's Financial Services Commission, told Bloomberg News on Tuesday.

On top of steps already taken - pledging US$130 billion to support banks, tossing a US$6 billion lifeline to the construction industry, and fiscal and monetary stimulus - Korea is in the 'most comfortable position' to implement additional economy-boosting efforts, Mr Jun said.

Korea's policy steps so far have won the support of the three main credit-rating companies. Standard & Poor's (S&P), which last week sparked the biggest one-day drop in the won since 1997 by placing Korea's five biggest banks on review for a downgrade, called the bank plan 'swift and broad'.

It's worth accentuating the positive. Korean companies have become more competitive since the late 1990s and banks' capital and asset quality are reasonable. The nation's debt ratio is near the lowest among major economies. Korea has US$240 billion of currency reserves. 'Fears of a balance of payments or banking crisis are overdone,' Paul Gruenwald, Singapore-based economist at Australia & New Zealand Banking Group Ltd, said in a research report on Wednesday.

It's true that Korea, like many other emerging-market economies, faces sizeable challenges as credit markets seize up. There also are vulnerabilities specific to Korea. 'These are bounded and not of a magnitude that warrant the doom-and-gloom commentary and pricing we are currently witnessing,' Mr Gruenwald said.

What's striking is how investors seem to have singled out Korea as the riskiest investment-grade economy in Asia. And in this interconnected, real-time world of ours, the more people chatter about another 'IMF crisis' in Korea, the more one becomes possible. Korea has made substantial progress since accepting a humiliating US$57 billion bailout from the International Monetary Fund in 1997. President Lee Myung Bak has been reassuring investors that Korea can ride out the worsening global storm.

A key problem is that banks are again making the pre-1997 mistake of borrowing in short maturities and in foreign currencies. As that realisation filtered through markets, Korea suffered a massive capital flight out of equities. Korea is a cautionary tale for Asia. If things get worse, capital will increasingly leave emerging markets in search of destinations deemed less risky.

Market turmoil is dominating boardrooms. A case in point was Samsung Electronics Co's decision this week to scrap a US$5.85 billion offer to buy SanDisk Corp, saying losses at the US company may worsen as a glut forces chipmakers to cut prices.

This is where the Bear Stearns dynamic comes into play.

First, hedge funds and speculators went after top-rated Wall Street firms; now, they are gunning for entire countries. With Iceland under their belt, Korea tops the list of next targets.

Export-driven Korea has its vulnerabilities. As Daniel Soh, an economist at Forecast Pte in Singapore, put it: 'South Korea's economy is definitely heading down. The construction industry is a major worry. The economy will slow into a recession. It's happening all over the world.'

It's the last part of Mr Soh's comment that's most important. The credit crisis is a global phenomenon and yet Korea is the Asian economy being punished the most. Some of this is attributable to negative news coverage. Isn't it possible that the more observers buzz hyperbolically about another Great Depression, the more likely consumers will internalise that risk and help bring it about? This is less about blaming the media than wondering why so many are negative about Korea for seemingly irrational reasons.

It stands to reason that investors would harbour concerns about Asia's emerging markets. After all, Thailand and Indonesia, both of which joined Korea in 1997 in accepting IMF bailouts, are taking their lumps.

Also, investors such as Kim Sung Kwang of Hanwha Investment Trust Management Co in Seoul have a point when they argue the 'government has been late in responding to market calls for such measures, which, once announced, don't go beyond what the market has already expected'.

There is more to be done and this is crunch time for President Lee, a former chief executive officer of several Hyundai Group affiliates. He needs to act boldly and convince investors that a crisis isn't imminent. Those bracing for the worst may want to give Korea the benefit of the doubt. -- Bloomberg

[LenaHuat]

I think IMF could be heading for S Korea soon. It's chest high in national debt