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

[winston]

South Korea:

Elected a pro-business government in February. It is a major exporter of manufacturing goods and importer of commodities, which this year gave it a rare balance-of-payments deficit that should now reverse if commodity prices stay lower. Its banks avoided the U.S. subprime mortgage market, and are generally solid - although domestic lending is rather high.

The country has an inflation rate of 5% and short-term interest rates - after an Oct. 27 cut - of 4.25%. Economic growth is around 4%, and the country boasts a budget surplus. The stock market is down 55% from its October 2007 high, and should bounce significantly if commodity prices stay down.

[millionairemind]

November 3, 2008, 12.31 pm (Singapore time)

Latest update
S Korea spends another US$11b to prop up economy
* S Korea to spend US$11b to help economy
* GDP growth may fall be lowest in a decade without stimulus
* Export growth hits 13-month low as demand dries up

SEOUL - South Korea plans to pump an extra US$11 billion into its economy next year to help fend off the impact of the global financial storm, which is beginning to hit exports - the country's economic lifeblood.

Mr Kang: If the current situation continues, the economy is expected to grow by around 3 per cent next year. If the global economy shrinks further, it may be difficult to achieve 3 per cent growth

Finance Minister Kang Man-soo said on Monday economic growth could fall to its lowest in more than a decade without the fiscal stimulus, which will need approval by parliament where the pro-government party has a large majority.

His comments came just after the government gave stark proof of the damage from the global economic downturn, announcing that export growth in October had fallen to a 13-month low, worse than analysts had expected.

'If the current situation continues, the economy is expected to grow by around 3 per cent next year. If the global economy shrinks further, it may be difficult to achieve 3 per cent growth,' Mr Kang told reporters.

Financial markets have slumped in the face of the global downturn, with both the won and the main Kospi share index losing around a third of their value since the start of the year in some of the most volatile trading seen since the Asian financial crisis a decade ago which ravaged its economy.

But at 0244 GMT, the Kospi share index was up 2.3 per cent at 1,138.11 points in what analysts said was largely a technical reaction to October's sharp decline.

The won had another see-saw day, opening almost 2 per cent lower, then rising, helped by the gains in share prices. It was quoted at 1,2885.90/80.10 to the dollar, up from its early fall.

Small companies
The 14 trillion won (US$11 billion) package includes 11 trillion won in additional government spending next year and three trillion in tax cuts. Much of the extra spending is aimed at the real estate and construction industries.

Money will also go to smaller firms, which face the risk of bankruptcy because of the liquidity squeeze and which together employ around 90 per cent of the workforce.

Asia's fourth-largest economy has looked particularly exposed to the lack of liquidity in the world's financial markets, that has left its financial institutions struggling to raise funds to pay off foreign debt and made them reluctant to lend at home.

With the new package, the latest in a series of policies since October to combat the effects of the looming global recession, growth next year could reach 4 per cent, Mr Kang said, still short of the 5 per cent the government had hoped for.

'While they (the measures) will certainly help, most investors believe it will take some time before benefits of those measures are reflected in the real economy,' said Hwang Keum-dan, analyst at Samsung Securities.

Mr Kang said he expected the current account to swing to a surplus next year of about US$5 billion in 2009 after posting its first deficit in 11 years in 2008, estimated at US$10 billion.

The government will also sharply increase bond sales to fund intervention in the currency market and offer state guarantees on foreign-currency deposits at local financial institutions. -- REUTERS

[millionairemind]

November 4, 2008, 2.43 pm (Singapore time)

S Korea says has no plans to tap IMF funding for now

SEOUL - South Korea has no plans to tap the International Monetary Fund (IMF) for support at the moment as the dollar liquidity crunch is not serious enough, its vice finance minister said on Tuesday.


'The current situation is not as serious as to require IMF support. The government has no plans to receive IMF support for now,' vice finance minister Kim Dong-soo, vice minister of Strategy and Finance, told foreign correspondents.

He said that South Korea could ask for up to US$22 billion in support from the IMF in case of emergency. -- REUTERS

[millionairemind]

Seems like signs of desperation..

South Korea Cuts Rate to 4% to Stave off Recession (Update1)

By William Sim

Nov. 7 (Bloomberg) -- The Bank of Korea lowered interest rates for the third time in four weeks and signaled it's ready to act again to prevent the economy from sinking into the first recession in a decade. The nation's shares and currency rose.

The bank reduced the key rate by 25 basis points to 4 percent, the lowest since 2006, adding to 100 basis points of cuts in October. Policy makers are focused on keeping ``the economy from weakening too much,'' Governor Lee Seong Tae said, adding he's prepared to ``take bigger actions if necessary.''

[kennynah]

they still have 400bp left to cut....to 0%...hahahaha....they can afford this slash.... and it's only 25bp

[iam802]

Economic crisis now...still have to deal with such political issues...

Edit:

And yes, I think the old leader up North is not in good health.


---------------------------

North Korea to shut border with S Korea

http://news.smh.com.au/world/north-kore ... -5nrw.html

North Korea announced Wednesday it would close its border with South Korea from next month, accusing Seoul of taking confrontation "beyond the danger level".

The communist state's military told its South Korean counterpart that a measure "to strictly restrict and cut off all the overland passages" would take effect from December 1.

A border closure would effectively shut down joint projects such as the Seoul-funded Kaesong industrial complex just north of the frontier.

The announcement follows months of icy relations, including threats by the communist state to expel South Koreans from Kaesong in protest at the spreading of cross-border propaganda leaflets by Seoul activists.

The North's official Korean Central News Agency (KCNA) said the border move was in response to Seoul's failure to honour agreements reached at inter-Korean summits in 2000 and 2007. It said the border restrictions were the "first step" in response.

KCNA said the head of the North's delegation to inter-Korean military talks sent a notice to the South's armed forces on Wednesday.

"The South Korean puppet authorities' unchanged stand and attitude towards the historic two (summit) declarations have been finally confirmed," KCNA quoted the notice as saying.

"Such stand and attitude are leading to the grave wanton violation of all the North-South agreements made according to the declarations."

Seoul's confrontational moves were "going beyond the danger level", it added.

South Korean officials could not immediately be reached for comment.

Cross-border relations soured after conservative South Korean President Lee Myung-Bak took office in February and promised to take a firmer line with the North after a decade-long "sunshine" engagement policy.

Lee said he would review summit deals reached between the North and his predecessors, which envisage joint economic projects costing tens of billions of dollars.

The North is also angry with South Korean activists who launch balloons carrying hundreds of thousands of leaflets across the heavily fortified border.

These criticise the North's leader Kim Jong-Il as a dictator and repeat claims that he is in poor health - an especially sensitive topic for Pyongyang.

More than 32,000 North Koreans earning $US60 ($A91.24) a month work for 79 South Korean factories at Kaesong. The project earns the North tens of millions of dollars a year.

[winston]

UBS tips 3pc contraction for SKorea

UBS said South Korea's economy will shrink 3 percent in 2009, the first contraction since the country's financial crisis in 1998.

Previously it forecast the economy would grow 1.1 percent next year. It expanded 5 percent last year.

"Korea's credit bubble is popping at the seams even as policy makers now attempt to shore up the system,'' Duncan Wooldridge, UBS's chief Asia economist in Hong Kong wrote to clients.

"Our first key assumption remains that Korea has a large credit bubble and it should burst,'' Wooldridge said.

Slowing exports, rising unemployment and expanding household debt are risks to the economy, he said.

BLOOMBERG

[winston]

On CNBC:-

Korea up 10% since Friday and 20% from the bottom ...

Fundamentals dont looks too good.

PE is not the way to value the market. P/B is ...

[winston]

SKorea cuts key interest rate to record low

South Korea's central bank cut its key interest rate to an all-time low, the fourth reduction in just over two months as Asia's fourth-largest economy slows down more quickly than expected.

The Bank of Korea reduced the benchmark seven-day repo rate for December by an unprecedented 100 basis points to 3 percent, a surprise to many economists who had predicted a 50 basis point cut.

"This is beyond expectation...,'' said Chun Chong-woo of SC First Bank. "It means financial authorities are firmly determined to avoid negative growth.''

The central bank has now cut the key rate by 225 basis points since October 9 in a bid to stimulate the economy.

AGENCE FRANCE-PRESSE

[millionairemind]

December 30, 2008, 4.18 pm (Singapore time)

Latest update
S Korea industrial output slumps most in 21 years

* South Korea industrial output falls most in 21 years
* Authorities to almost double financial support for banks
* Manufacturing business confidence hits historic low
* Stock market ends 2008 down provisional 40%
* Won up in Dec most in nearly 11 years, down 26% in 2008

SEOUL - South Korea's industrial output slumped in November by its biggest margin in more than two decades, underscoring the depth of the slump in the economy and the urgency of official efforts to shore it up.
The merchandise trade account is expected to suffer, given a global recession

The output figures came after the country's top financial regulatory agency said Korea Development Bank (KDB) and other state-run financial institutions plan to ramp up financial support for local banks in 2009 by 89 per cent to more than US$8 billion.

South Korea has cut interest rates to a record low, offered guarantees on foreign debt and drawn up a fiscal stimulus package to shore up an export-reliant economy some analysts say will post its first contraction next year since the Asian financial crisis.

Reflecting the tightening grip of the global financial crisis, two surveys showed manufacturing sentiment at multi-year lows and the country's current account swinging once again into a deficit.

Analysts said the bleak data reinforced their view that the Bank of Korea (BOK) could slash its already record-low interest rate of 3.0 per cent further in coming months. Bond futures rallied and local stocks gave back most of an early 2.4 per cent gain on fears for the economic outlook.

'The BOK will cut rates further as the downturn deepens. I think it may cut rates by another 150 basis points by the end of the first half,' said Lee Sang-jae, an economist at Hyundai Securities.

The central bank next reviews policy on Jan 9.

South Korea's statistics agency said industrial output fell by a seasonally adjusted 10.7 per cent in November from October, the biggest fall in 21 years, as the global downturn took its toll.

From the same year-earlier month, output was down 14.1 per cent.

The data suggests continued pain for the country's exporters, which are already seeing demand wilt because major markets, including the United States, Europe and Japan, are in recession.

South Korea expects the country's exports in December to show an annual decline of around 15 per cent after a revised 19 per cent drop recorded in November, the Finance Ministry said.

It provided the projection while commenting on November industrial production performance and the outlook for December, but did not elaborate.

South Korea's Ministry of Knowledge Economy is due to release provisional December export figures on Friday.

Confidence tumbles
The Financial Services Commission reported to President Lee Myung-bak that the state-run financial institutions would provide a combined 10.2 trillion won (US$8.10 billion) next year to local banks, up from 5.4 trillion in 2008.

'These plans are designed for the public institutions to deal with the troubles facing the (local) economy promptly and aggressively,' the commission said in a statement.

Some of the figures have already been included in other government measures announced earlier and reflect the sort of policies being considered globally to help banks through the global credit crisis.

Japan's government is considering a US$110 billion scheme to buy bad loans and other financial assets to help its banks, the daily newspaper Sankei Shimbun said on Tuesday.

The Korean funds would be used to free up cash at banks, such as by buying local bonds and bad debts, to boost lending or allow the banks to bolster their capital bases.

The central bank said earlier its manufacturing business survey index for January fell to a record-low. The reading marked the seventh consecutive month of decline.

Separately, the Federation of Korean Industries, a lobby group for big companies such as Samsung Electronics Co and Hyundai Motor Co, said its business survey index for January dropped to an 11-year low.

Slump
The BOK forecast early this month the economy would grow only 2 per cent next year after an estimated 3.6 per cent gain in 2008 as the global turmoil hurts demand for the country's exports.

But some international investment banks, such as UBS, have warned South Korea's export-led economy would contract by as much as 3 per cent in 2009, which would mark the first decline in gross domestic product since 1998 when Korea was in the grips of the Asian financial crisis.

In its last day of trading of the year, the Korean stock market closed up a provisional 0.6 per cent, well off the day's high and down around 40 per cent from 2007 following a record level of foreign selling in 2008.

The won ended local dealings up 0.3 per cent against the dollar, supported by state intervention, and rose 16.6 per cent in December, its biggest monthly gain in nearly 11 years.

But it fell more than a quarter this year hit by sustained capital flight from the country.

Central bank data showed the current account once again swung into a deficit in November, although the balance of payments deficit narrowed as capital flight eased.

South Korea is expected to produce its first current account deficit in 2008 for 11 years. -- REUTERS