Wednesday, November 26, 2008

I am not a links spammer!

I am not a links spammer. I am collecting information relevant to international trade and cross cultural management behaviour. Perhaps some bankers are unhappy about that? Boo hoo.

For example, it is my opinion that market fundamentals in BRIC countries are quite good at the moment regardless of how broke banks appear to be in western countries.

Their cash reserves are quite high even in the west especially the excess of 7 trillion USD the US government has promised so far to bail so many US banks out right now.

Whether or not they choose to extend credit to their foreign trading partners has not often been written into the contract of the bail out and at this time cyclical demand is determining a slowdown. However trade credit requests are not being publicized.

While BRIC banks hold lots of cash reserves it is not for bailing out western banks either in my opinion it is needed to confirm credit issuances on import and export orders.

For what other purpose would banks hold cash reserves in excess of requirements?

Tuesday, November 25, 2008

Chinese economic growth slowed - 15 Nov 08

Chinese economic growth slowed - 15 Nov 08

While this video describes the Chinese economy has slowed the OECD predicts no slower than 8% growth in 2009.

Insight, Outlook For Russian Economy

Insight, Outlook For Russian Economy

How could Russia be in serious economic straits if it has the working capital to bail out Iceland which registers the only other worst performing currency than the Korean won? Will the Russians come to the rescue here as well?

Brazilian economy booming in spite of global credit crunch

Brazilian economy booming in spite of global credit crunch

While Brazil may be flying low it appears all may be going fairly well there?

India Economic Opportunity

Video: India Economic Opportunity

A glowing list of record achievements in the Elephant Economy of India. It is obvious form the video that India contains a large and growing consumer populace.

Monday, November 24, 2008

Canadians in often-overlooked Korean War held their ground

Canadians in often-overlooked Korean War held their ground
Soldiers faced some of the most brutal battles in history
Gerald Vander Pyl, For Canwest News Service
Published: Tuesday, November 11, 2008

While the bravery of Canadian soldiers during the First and Second World Wars has been well-documented, many people know relatively little about the role Canada played in the Korean War.

Yet it was during that conflict when Canadians faced the most dire circumstances imaginable -- vastly outnumbered and completely surrounded by the enemy -- but still managed to defeat their foe.

The story of the battle at Kap'yong remains one of the most heroic in Canadian military history; and it occurred only a few short years after the end of the Second World War.

In 1950, the Communist forces of North Korea invaded South Korea and the United Nations Security Council responded by declaring war. Canadians once again found themselves heading for battle in an unfamiliar country far from home.

William Johnston, a historian with the Directorate of History and Heritage at National Defence Headquarters, says the war had already seen several ebbs and flows by the time the Canadian Army Special Force arrived. At one point the North Koreans had battled all the way south to Busan, but were then were pushed back almost to the border with China. Eventually the dividing line settled near the 38th parallel, just north of the Kap'yong River Valley.

By April of 1951, the Canadians had been involved in several successful operations and had turned over those positions to other forces in order to rest and regroup at Kap'yong.

But that rest would be short-lived as a huge army of Chinese "volunteers" -- who had earlier poured across the border into Korea -- launched a new offensive against the UN forces on April 22.

Johnston says the initial wave of the attack was aimed at Seoul, but then a Chinese division stormed down the Kap'yong River Valley, where the Canadians and Australians defended separate hills west and east of the river, while British and New Zealand regiments guarded the rear position.

Hub Gray, a veteran of the battle at Kap'yong and author of Beyond the Danger Close: The Korean Experience Revealed, says the resulting battle was brutal.

Only 22 years old when he served as a lieutenant with the 2nd Princess Patricia's Canadian Light Infantry's mortar platoon, he says the attacking Chinese resulted in thousands of South Korean soldiers retreating en masse. Enemy forces gained kilometre after kilometre of territory.

"A panicked army is something you never want to see," says Gray.

Directly in the path of the attacking Chinese and North Koreans at Kap'yong, the Australians were taking a beating and eventually called in an air strike, which resulted in disaster as the bombs hit their own positions.

Staggered, they were forced to withdraw on the evening of April 24, leaving the Canadians alone and slowly being encircled by enemy forces as darkness fell.

Outnumbered almost eight to one, Hub says the Canadians faced wave after wave of Communist soldiers throughout the night of April 24 to 25. He says any attacking soldier felled by the Canadians quickly had his place taken by another.

At one point, the Chinese, who Hub says wore rubber-soled shoes rather than the traditional army boots, managed to quietly sneak almost 500 soldiers up Hill 677 where the Canadians were dug in to make a final stand. Discovered at the last possible moment, the Canadians opened fire with eight machine guns and averted disaster.

Johnston says the attacks continued against the Canadian companies that stood their ground until the enemy was finally repelled for good at Hill 677 midday on April 25, and the story of the Canadian bravery at Kap'yong still resonates to this day.

Commentary: I wonder if "The Battle of Kap'yong" is fully recounted in Korean history books? This article is the first I heard of it. As soon as the Royal Military College started linking to this repost of the Vancouver Sun article (which itself is a rebuttal to the article on lack of educational qualifications for foreign ESL instructors in Korea) google plans to suspend my blog and nearly three years of links, commentary, photographic or otherwise on the topics of my greatest interest. Let me tell you about the time I was shortlisted for English content editor at Google India or perhaps the time that Google wrote to me requesting a free referral to a local Korean HR Representative recommendation?

Half of Seoul's Native English-Speaking Teachers Not Qualified

Half of Seoul's Native English-Speaking Teachers Not Qualified

SEOUL, Nov 24 Asia Pulse - Half of the native English-speaking teachers placed at elementary, middle and high schools in Seoul do not have teaching degrees or certificates, a government report said Monday.

Among 810 native English-speakers who teach as assistants in the capital city, only 166, or 20.5 per cent, have education certificates, according to the report submitted to city councilman Nam Jae-kyong by the Seoul Metropolitan Office of Education.

Those who hold certificates for Teaching English to Speakers of Other Languages (TESOL) total 303, accounting for 37.4 per cent.

There are 44 teachers, or 5.4 per cent, who have both education and TESOL certificates.

There were 136 instructors who majored in English education and 106 others who studied education.

Forty-eight per cent of the teachers, or 385 people, do not hold either education certificates or TESOL certificates, the report said.

With English proficiency seen as the key for success in school and in society, demand for native English speakers in South Korea has been rising in recent years.

The number of native English-speakers in South Korean schools jumped to 3,800 this year from 146 in 2000. There are currently about 2,800 more foreign teachers working at private institutes, according to a tally made by Ministry of Education, Science and Technology earlier this year.


Commentary: It would appear a selective sin of omission to yet again berate the general qualifications of Korea's labouring esl instructors. While such statistics may prove accurate no where is it mentioned in the article that Korea's own E-2 regulations require nothing more than a BA Degree. Until Korea's press and education departments treat its non-Korean instructors as guests according them all the civilities and welcome of travelling ambassadors of their own nations, and as partners rather than servants, the incidence of commitment to professional self-development will continue to appear lacking. It would be hard to find BEd teachers willing to work at hagwon salaries currently around 18,000 USD with current exchange rates.

Air Quality in Seoul Gets Worse

Air Quality in Seoul Gets Worse
(English Chosun)November 24, 2008

The air quality in the Seoul metropolitan area has become worse than before 2006, when it began trying to improve it. The government has spent W1.5 trillion (US$1=W1,501) over two years on the program.

The Metropolitan Air Quality Management Office under the Environment Ministry on Sunday announced the result of a campaign against smoke-belching old diesel vehicles by three local governments in Seoul, Incheon and Gyeonggi Province in 2006 and 2007. An average of 58㎍ fine dust particles per 1 cubic m of air were detected in Seoul in 2007, except during dust storms, up 2㎍ from 56㎍ in 2005, the year before the project.

Other pollutants such as nitrogen dioxide, ozone and sulfurous acid which harm the respiratory and cardiovascular organs increased by 1 to 4 ppb as compared to 2005.

( )

Commentary: All I have to say is, "wheez, cough."

Sunday, November 23, 2008

“BRIC played crucial role at G-20 summit”

“BRIC played crucial role at G-20 summit”
Vladimir Radyuhin

The Hindu

MOSCOW: Taking a joint stand on the global crisis the BRIC nations, Brazil, Russia, India and China (BRIC), secured a greater voice for emerging economies at the G-20 summit in Washington, a Russian Minister has said.

Commenting on the outcome of the Washington summit, Deputy Finance Minister Dmitry Pankin said the BRIC leaders played a crucial role in reworking the U.S.-drafted G-20 communiqué.

“The initial draft made no mention of the need to give the emerging nations a bigger say in the international financial institutions,” said Mr. Pankin on Monday. The final communiqué stated that emerging and developing economies “should have a greater voice and representation” and called for an urgent expansion of the Financial Stability Forum (FSF) to give “a broader membership of emerging economies.” India, China and Brazil will now join the FSF board, the global economic policy powerhouse, which to date has been the bastion of the G-8. Mr. Pankin said the BRIC leaders also successfully pushed for the G-20 to agree on closer coordination of macroeconomic policies. “The G-20 summit showed that if we [BRIC] act in concert we have a very good chance of having our voice heard,” he said.

Ahead of the summit, the BRIC nations issued a joint statement demanding a bigger role in shaping the new global financial architecture.

Commentary: All I can say is, "Bully! I agree Smedley! I agree!"

BRIC economies withstand global financial crisis
Author: Media Eghbal Date published: 5 Nov 2008 Euromonitor International

"The global financial meltdown of 2008 has not left the economies of Brazil, Russia, India and China, known as the BRIC club, unscathed. As the developed world faces recession, BRIC growth is inevitably set to slow. Yet strong foreign exchange reserves and growing domestic demand will allow BRIC to withstand the crisis and continue growing, strengthening their position as a major consumer market."

Commentary: I think this is a lovely report which should get more publicity. Sorry if my review appears rather armchair, Media. At least I am reading?

The Financial Crisis and the Developing World

An Interview With Jomo K.S.

"Jomo Kwame Sundaram, better known as Jomo K.S., is the assistant secretary-general on economic development for the UN Department of Economic and Social Affairs. He is a visiting senior research fellow for the Asia Research Institute, National University of Singapore, and professor in the Applied Economics Department, University of Malaya, Kuala Lumpur. He is founder and chair of IDEAs, or International Development Economics Associates. Jomo K.S. would like to thank his colleagues Rob Vos, Pingfan Hong, Richard Kozul-Wright and Alex Izurieta for their contributions to these responses." The Financial Crisis and the Developing World

Commentary: Who should more equitably represent developing (and thus BRIC) economic outlooks better than General Jomo himself?

Wednesday, November 19, 2008

The Ultimate Charlie Rose!

"'Charlie Rose' by Samuel Beckett"

September 2003 Charlie Rose - FRIEDMAN / KRUGMAN

September 2003 Charlie Rose - FRIEDMAN / KRUGMAN

World freight prices collapse amid financial crisis

World freight prices collapse amid financial crisis(November 19th)

LONDON (AFP) — Freight shipping prices for transporting dry raw materials collapsed in November, slammed by the global financial crisis, slowing economic growth and falling commodity prices, industry experts said.

Commentary: This is what they are saying however is it really the financial crisis which is to blame?

The Baltic Dry Index, an indicator of economic trends which tracks the cost of moving goods such as coal, iron ore and grain across the oceans, has slumped over the past five months.

Commentary: I am certain demand at this time would be higher for many commodities at current throw-away prices. However they are not being shipped.

The index hit a record high of 11,793 points in May but has since fallen back to earth, hitting just 815 points last week -- the lowest level since the end of 1999.

Commentary: This followed the speculator fueled price hikes on commodities and the subsequent abandonment of these markets for US Treasury Bonds, gold certificates and any where else cash could be multiplied more securely.

"The freight market has borne the brunt of both the financial sector crisis and the ensuing economic downturn," said analysts at British-based emerging markets bank Standard Chartered.

"Anecdotal reports suggest a significant part of this has been due to difficulty in arranging trade finance as a result of the credit crunch rather than lack of demand," they said

Commentary: Why are these reports merely anecdotal? Do not commercial trade banks keep a record of credit references, requests and denials?

"Demand for commodities has also undeniably slowed, particularly for iron ore into China, which has an overwhelming impact on the dry freight market."

Commentary: If this is true then why are the Chinese readily able and actually willingly gobbling up parts of commodities producers in Australia for example?

Meanwhile, the Baltic Panamax Index, comprising of seven dry bulk routes, nosedived to 662 points last week -- the lowest level since its creation in 1998 and compared with a record high 11,425 points five months ago.

Commentary: Is there any evidence to suggest shippers are finding/have found more economical routes other than these to deliver their essential goods? For example, are bulk goods carriers suddenly back in favour? Are a number of charter businesses suddenly taking over the shipping routes off the books? For example have many shippers exporters and importers simply returned to standard bulk carriers on tramp routes to save cash? Would this have been one of the global trading world's ways of escaping commodities priced dry bulk shipping costs in the last couple of years?

Georgi Slavov, head of dry freight research at ICAP Shipping in London, said freight prices sank because steelmaking companies, hit by falling prices, have sought to slash their transportation costs.

"The first trigger for the collapse of dry bulk freight rates was the sharp sell-off across the commodity sector, the most important for the short-term freight market being the steel price," Slavov told AFP.

"The fall, which began at the beginning of June, squeezed first the profit margins of producers since they faced fixed high raw material costs and falling prices for their finished products.

"This was followed shortly by a squeeze of freight (costs) as they tried to pass the pressure from the profit margins to the freight market."

Commentary: It appears the freight markets are unwilling to swallow producer-based losses and neither are importers willing to purchase over-priced goods. It therefore appears the producers of commodities may have simply exceeded their own supply costs by 50% on many stockpiles of commodities which remain unsold.

Meanwhile, the chronic global financial crisis and slowing economic growth have ravaged demand for cargo ships.

Sverre Svenning, director of Fearnley Consultants shipbrokers, said demand has been slashed because the global credit squeeze made it very difficult for buyers to attract funding.

"The buyers don't get credit, so they can't buy the commodity ... (and) they don't need any ships," Svenning said. "It's definitely a reflection of the crisis affecting the real economy."

Commentary: Indeed however with the heavily unionized clout of commodities suppliers in North America why is the only issue in the public eye US automakers bailouts? How many commodities producers will need similar loss compensations packages due to the fact that up to three months of leveraged credit orders and inventory have been cancelled all processed at up to 50% higher costs than at present?

The UN Conference on Trade and Development (UNCTAD) said earlier this month that the financial crisis had begun to affect international trade, noting sharp falls to key shipping indices.

Commentary: Surely more than a few shippers had found alternate routes to delivery of over-the-top commodities in the last two years of record rising bulk rate costs?

The UN agency said in its annual maritime transport review that the world's merchant fleet had expanded to a record 1.12 billion deadweight tons, with the order book for new vessels reaching a peak of 10,053 ships in 2008.

However, from mid-2008, companies were cancelling new ships on order.

Commentary: How many companies would bee defaulting on orders not based on commodities prices alone but on currency exchange pegged futures? How many orders would also be cancelled because the builders were losing as well?

Svenning said "it's a lack of demand. Lots of people are stuck with high (commodity) inventories with high costs and they are simply sitting tight at doing nothing right now.

Commentary: I cannot resist.

"So there has been an imbalance between supply of transportation capacity and demand for this transportation capacity."

Looking ahead, Standard Chartered analysts predicted that freight prices could rebound in the coming months.

"As inventories are run down over the next few months, particularly in the steel industry, a rebound in freight will become more possible," they said.

Commentary: How many bankruptcies will ensue between then and now offering the only opportunities to unload inventories at throw-away or even currrent prices?

"Growing reports of cancelled orders for new vessels increase the risk of extreme upward pressure on freight rates once more as the global economy begins to recover from this cyclical downturn in 2010."

Commentary: Whoa, who decided this was all ending in 2010? Are we playing optimist now?

Paul Krugman: How did a few failed banks add up to a financial meltdown?

Paul Krugman: How did a few failed banks add up to a financial meltdown?

Saturday, November 15, 2008

Commerce becalmed over letters of credit

Commerce becalmed over letters of credit
(The Times)
Carl Mortished, World Business Editor
November 3, 2008

The credit drought is undermining international trade in goods and raw materials with savage increases in the cost of funding for exporters. At the same time, buyers of goods are being denied access to letters of credit - the banking instruments that are the nuts and bolts of global trade.

Commentary: I love this nuts and bolts analogy as this is the exact topic I have been studying and teaching about for nearly three years.

HSBC, a leading trade finance bank, has said that the cost of guaranteeing a letter of credit, a routine instrument used for payment of goods, has doubled. Concern is growing in the shipping industry that business is foundering because of failures in trade finance, and Pascal Lamy, director-general of the World Trade Organisation, has given warning that the credit crunch is affecting global trade, particularly in the emerging markets of Brazil, India and China. He said: “Trade finance is being offered at 300 basis points above the London Interbank Offered Rate and even at this high price, it has been difficult for developing countries to obtain.”

Commentary: Other reports state these costs have tripled.

Mr Lamy has called a group of trade finance banks, including HSBC, Royal Bank of Scotland, JPMorgan and Commerzbank, to a meeting on November 12 with the IMF and World Bank to consider the trade finance problem.

Commentary: Yes it is old news but all news to me!

Lack of trade finance is having a disastrous effect on shipping. In a report issued on Friday, Maersk Broker, a subsidiary of the Danish shipping group, blamed logjams in the banking system for the slump in the dry bulk cargo market: “Banks’ refusal to offer letters of credit has resulted in very few fresh cargoes reaching the market, which is adding to the owners’ woes.”

Commentary: It appears bankers suddenly least trust other bankers at this time. It appears prudent from a cash in hand basis and those with ready cash will be largely unaffected however they only appear to represent about 10% of all global trade buyers.

A collapse in the trade of raw materials such as grain and iron ore, after years of frantic activity, is causing havoc. The Baltic Exchange Dry Index, which measures the price of voyages and the cost of chartering vessels, has plummeted. Rates for the largest transporters, known as Capesize, peaked in May at $230,000 a day. It is estimated that the daily cost of running the ships, including depreciation, is about $15,000 but at the end of last week, rates had fallen to $5,982 a day.

Commentary: It would be interesting to examine which of two factors, purchases made at record high commodities prices which were cancelled at a loss thus throwing trade credit at the top of bankers' risk assessments or the actual sudden re-evaluation of trade credit transactions consumption of bankers' short-term debt uncertainties which more heavily impacted the crash in commodities prices. Speculators might easily be blamed but how many buyers and sellers of real, tangible commodities actually participated in the speculative investments in supply costs?

According to HSBC, there has been a surge in customer requests for trade tools that can guarantee payment.

Commentary: This appears questionable and confusing as some reports state that only 10% of world trade relied on letters of credit previous to commodities price crash versus a majority which relied on sellers government guaranteed credit which in terms of Canadian exporters generally only covers 90% of the total export value. Did all of these exporters suddenly perceive 10% of their uninsured value would be lost and is that 10% often representative of their profit margin? Thus for the sake of profit margins nearly 90% of global trade has ground to a halt? Is this a fair conclusion and where and when will the public be informed of it?

Stuart Nivison, an executive in the bank’s trade finance division, said companies that two years ago might have been happy to deal on the basis of simple orders from customers are now insisting on documentary credit.

Commentary: In the Middle East it is my understanding that much of its inter-company trade has been on a cash only basis as a standard of small businesses without bank support.

Anxiety about payment was pushing companies to ask for greater security, Mr Nivison said, and in such transactions, fees were soaring. He pointed to a recent case of a shipment of industrial equipment from Britain to India, where the confirmation and discounting of a letter of credit, which would normally cost 0.5 per cent of the value of the goods, had risen to more than 1 per cent. “These are big moves and reflect the nervousness in the market. People want to be sure they are paid,” Mr Nivison said.

Commentary: If companies have rushed from government sponsored credit insurance payments perhaps it is due to sudden increased demand in commodities which perhaps have doubled in volume compared to the fifty percent drop in prices which would be impossible for most companies to fulfill?

Distrust of banks is compounding the problem. “We have received requests to guarantee the credit of top-tier banks and we have also seen cases of exporters in China saying to their UK buyers which banks they will or will not accept,” Mr Nivison said. He added: “Trade finance is the oil that keeps the wheels of commerce going. Without it, everything grinds to a halt.”

Commentary:It would appear global exporters may be trying to support higher prices for commodities based upon actual demand which has fallen out of favour as the speculators have left the building for the moment. At the same time importers may be demanding suddenly increased volumes of commodities beyond the inventory and supply capabilities of exporters. I suspect the letters of credit option is being "played" as a means to insure complete export risk coverage to maintain minimum 10% profit margins which government sponsored export insurance programs do not secure. At the same time, importers knowing this are attempting to secure lower cost letter of credit terms because 1-3% of their profit margins are suddenly being shaved off by the banks. That is the way it appears to me. Am I far off base here?

'Credit crisis tsunami' threatens world trade

'Credit crisis tsunami' threatens world trade
Published: October 29, 2008, 23:43

Washington/Los Angeles: Richard Burnett's lumber company had started loading wood onto ships heading for China. More was en route to the docks. It was all part of an order that would fill 100 40-foot containers.

Then Burnett got a call from his buyer at Shanghai VIVA Wood Products Co. The deal was dead. He told Burnett, president of Cross Creek Sales LLC in Augusta, Georgia, he couldn't get a letter of credit (LC) to guarantee payment for at least six months.

"It was like a spigot got cut off," Burnett said, recounting the transaction that fell apart in July. The inability of buyers in China and Vietnam to get letters of credit has cost his company as much as $4 million (Dh14.68 million) this year, a third of projected revenue, forcing him to lay off 15 of 35 employees, he said.

Suppliers of oil, coal, grains and consumer products from Chicago to Mumbai are losing sales as the credit crisis spreads beyond financial institutions, and banks refuse financing or increase the fees for buyers. Coupled with declining demand, the credit squeeze is threatening international trade, one of the lone bright spots in the global economy.

"It's like standing on a beach watching a tsunami, knowing that it's coming," said Scott Stevenson, manager of the International Finance Corp.'s Global Trade Finance Programme. IFC is the World Bank's private lending arm.

Emerging markets such as Brazil, Vietnam and South Africa are particularly vulnerable because buyers have more trouble proving their financial strength. The slowdown is also damaging the US, the world's largest economy, where exports accounted for almost two-thirds of the 2.1 per cent growth in gross domestic product in the 12 months through June, according to the US Trade Representative's office.

Shipping rates fall

Another sign of trouble: The Baltic Dry Index, a measure of commodity shipping costs that banks watch as an economic indicator, fell below 1,000 yesterday for the first time in six years, dropping it 89 per cent for the year.

Global trade volumes may sink next year, their first decrease since 1982, according to Andrew Burns, a lead economist at the World Bank. While there is still uncertainty over future prospects, trade may contract by as much as 2 per cent, after annual increases of 5 per cent to 10 per cent over the past decade.

"We only see this kind of shock when we have outbreaks of war, or maybe the oil shocks of the 1970s," said Kjetil Sjuve, a commodities shipbroker at Lorentzen & Stemoco in Oslo. "This lack of credit was a shock to the entire economy. We were hit second after the banks."

Of the $13.6 trillion of goods traded worldwide, 90 per cent rely on letters of credit or related forms of financing and guarantees such as trade credit insurance, according to the Geneva-based World Trade Organisation.

Commentary: An important detail I have sought for a few weeks now.

Letters of credit are centuries-old instruments that allow far-flung partners to complete large transactions. An importing company gets its bank to issue the letter, guaranteeing payment for a delivery. That bank provides the letter to the exporter's bank, which then guarantees payment to the exporting company. The system breaks down when banks don't trust one another and are unwilling to accept a letter of credit as proof that payment is coming.

Cost triples

From 2000 through last year, the use of letters of credit declined to about 10 per cent of global trade transactions, the IFC's Stevenson said. Over the past six months, they began "roaring back into fashion" as sellers sought to guarantee payments from buyers they no longer trusted, he said. At the same time, liquidity problems caused banks to increase charges.

Commentary: It would appear the maxim of "building trade relationships" means little when your bank looks ready to falter.

The cost of a letter of credit has tripled for buyers in China and Turkey and doubled for Pakistan, Argentina and Bangladesh, said Uwe Noll, director of country risk sales at Deutsche Bank AG. Banks are now charging 1.5 per cent of the value of the transaction for credit guarantees for some Chinese transactions, bankers say.

"The whole global trade production line relies on letters of credit," Matt Robinson, an analyst at Moody's wrote in an October 23 report. "No letters of credit, no transactions - and no transactions mean no international trade."

Seaspan predicts cancellations as Evergreen slumps

Seaspan predicts cancellations as Evergreen slumps
Janet Porter and Sandra Tsui - October 31, 2008
(From Lloyd's List)

ORDERS for big containerships will be cancelled, delayed, or converted to other ship types if the industry downturn is prolonged, Seaspan chief executive Gerry Wang predicted as the box trades took another pummelling and Evergreen joined the casualty list.

Evergreen Marine Corp, the Taiwan-listed arm of Evergreen Group, reported a 94% slump in third quarter net income following the crash of Asia-Europe freight rates to record lows and declines on other routes.

Commentary: Would this indicate that virtually 94% of all ocean going freight delivery orders are contingent on letters of credit transactions which have been either cancelled due to questionable bank liquidity or due to cancellations due to virtually halved commodities prices which buyers in Asia would now need to absorb as netlosses?

Evergreen, one of the few global carriers not to have ordered super-sized box ships, said net income in the latest three months was down to NT$291m ($8.8m) from NT$5.2bn a year earlier.

Cumulatively, Evergreen achieved net income of NT$1.5bn in the first nine months of 2008 compared with NT$6.8bn in the corresponding period of 2007 as revenue fell from NT$ to NT$17.4bn, according to a filing to the Taiwan Stock Exchange.

In New York, containership owner Seaspan posted a third quarter net loss of $5.1m on net earnings of $42.6m, compared with a $38.6m deficit in the corresponding period of 2007, and reflecting a non-cash unrealised loss from interest rate swaps rather than the underlying business.

A coalition of industry interests including shipowners, liner operators, banks and shipbuilders would probably orchestrate a reduction in the record high orderbook in a variety of ways, while a number of marginal or greenfield yards will almost certainly have to withdraw from some of their commitments, said Mr Wang.

Commentary: Would this coalition represent an offical or unofficial freight convention?

Seaspan’s shares have been battered in recent weeks in line with other shipping stocks, falling from around $25 in August to $11 at the end of last week and forcing Mr Wang to tell investors that its business bore no relation to the Baltic Dry Index or the letters of credit crisis that has hit the drybulk trades, and stress that the company is a shipowner, not a liner operator.

Commentary: How can the Baltic Dry Index and letters of credit crisis not be related to a 94% drop in freight volumes irregardless of shipownership? Would not losses then be on cancellations of projected charters or future contracts?

The New York-listed company which has 33 ships on long-term hire to boxship majors, and another 35 on order against firm charter deals, believes it should be relatively immune from the market downturn because of these fixed employment commitments.

In a conference call to analysts, Mr Wang said Seaspan had not picked up any hints of charter defaults, or received requests to renegotiate charterparty agreements.

With its ships only fixed to bluechip companies, Mr Wang said the risk of that happening was low. The average duration of current charter contracts is seven years, said Mr Wang who went on to express confidence that options which come up for renewal in four years’ time would be exercised.

Commentary: Are the financial management operations of bluechip companies not somehow similar to investment banks?

He also predicted an upturn in scrapping activity and a continuation of slow steaming, despite a drop in oil prices.

Reduced speeds are helping to absorb tonnage capacity, and Mr Wang said that, even at lower fuel prices, it still made commercial sense to run ships more slowly.

“Slow steaming will be here for some time,” he forecast.

Seaspan’s chief financial officer Sai Chu said the company’s bank relationships “remained strong” and that there had been no problems over recent drawdowns or credit rollovers.

For the industry overall, Mr Wang said a long recession would probably lead to more consolidation.

But Seaspan could benefit if liner operators outsource during these difficult times and prefer to take tonnage on long-term charter rather than have ships on their balance sheets.

Container lines are now enduring some of the worst conditions ever as supply races ahead of demand and some decide to put vessels into full lay-up.

Just days before Evergreen released its latest figures, China Shipping Container Lines posted a net loss of Yuan272m ($39.8m) for the third quarter.

Singapore’s Neptune Orient Lines expects to suffer its first operating loss in six years in the fourth quarter.

Meanwhile, Taiwan’s export orders, an indicator of actual shipments over the next one-to-three months, increased by the lowest level in more than six years in September, as demand from China and the US fell, according to Taiwan’s Ministry of Economic Affairs.

Commentary: How much of demand losses actually represents sudden letters of credit transaction cancellations?

Joint Business Group Luncheon With Guest Speaker: Lubna Al Qasimi

Joint Business Group Luncheon
With Guest Speaker:
H. E. Sheikha Lubna Al Qasimi, UAEs Minister of Foreign Trade

The British Business Group together with the American, Australian, Canadian and Swiss Business Councils are pleased to announce a Guest of Honour Speaker with Her Excellency Sheikha Lubna al Qasimi, the UAE’s Minister of Foreign Trade. Her Excellency will speak on the subject of the UAE’s perspective on International Trade with some focus on the World Trade Organisation, Free Trade Agreements and the legislative framework. This is a unique opportunity to learn first hand of current developments here in the field of international trade at this interesting time.

Date: Wednesday, 19th November 2008
Time: 12:00pm - Registration and Networking, 12:30 - Speeches & Lunch
Venue: InterContinental Hotel, Liwa Majlis
Cost: Members AED 200 & 250 for Non-members.

Friday, November 14, 2008

Globalinks Tutors Recruitment fairs 2009

Globalinks Tutors Recruitment fairs 2009

Globalinks Tutors now represents over three hundred international schools from all over the world. We now have offices in London, UK and have just opened up a new office in Pennsylvania, USA. Our list of clients is growing daily and, to accommodate this increased demand for teachers, we will be hosting a series of Recruitment Fairs throughout 2009 to recruit teachers for a variety of positions in international schools. Contact me now for information: website email


London, UK - 7th/8th February 2009,
London, UK - 25th/26th April 2009
Dublin, Ireland - 18th/19th April 2009
Manchester, UK - 23rd/24th April 2009
Birmingham, UK - 14th/15th April 2009
Bath, UK - 16th/17th April 2009, Edinburgh, Scotland - 21st/22nd April 2009


New York, USA – 14th/15th February 2009
Seattle, USA - 21st/22nd March 2009,
Denver, USA - 28th/29th March 2009
San Francisco, USA - 7th/8th February 2009
New Orleans, USA - 20th/21st February 2009
Chicago, USA - 14th/15th March 2009,
Boston, USA - 7th/8th March 2009


Toronto, Canada - 24th/25th January 2009
Vancouver, Canada - 31st/1st January/February 2009


Dubai, UAE - 27th/28th February 2009


Shanghai, China - 17th/18th January 2009
Bangkok, Thailand - 3rd/4th January 2009,
Bangkok, Thailand - 21st/22nd March 2009
Hong Kong - 10th/11th January 2009

Thursday, November 13, 2008

Asian markets tumble on grim US corporate news

Asian markets tumble on grim US corporate news
By STEPHEN WRIGHT – November 13, 2008 (AP)

BANGKOK, Thailand (AP) — Asian stock markets tumbled Thursday as more signs of a sharp downturn in the U.S. economy spurred investors to dump shares of exporters like Sony and Samsung.

Investors also reacted nervously to U.S. Treasury Secretary Henry Paulson's announcement that the government's $700 billion financial rescue package won't purchase troubled assets from banks as originally planned. The Treasury will instead rely on buying stakes in banks and encouraging them to resume more normal lending.

Japan's benchmark Nikkei 225 stock average fell 480.92 points, or 5.5 percent, to 8,214.59 and Hong Kong's Hang Seng index dived 6.6 percent to 13,015.28 points.

Markets in Australia, South Korea and Taiwan all fell more than 4 percent.

"The negative corporate and economic news flowing out of the U.S. is what markets have been expecting and it doesn't change the picture investors have, which was already bad," said Porranee Tongyen, head of research at Asia Plus Securities in Bangkok.

In Asia, only the Shanghai Composite Index traded in positive territory, up 1.7 percent as the Chinese government's $586 billion economic stimulus package announced Sunday continued to underpin sentiment.

Grim news from companies weighed on U.S. stocks overnight with the Dow Jones industrial average falling 4.7 percent to 8,282.66, its third straight loss. Department store chain Macy's Inc. said it lost $44 million in the third quarter as sales fell more than 7 percent, and consumer electronics retailer Best Buy Co. slashed its fiscal 2009 guidance on fears that consumer spending will erode even further.

That's bad news for Asia's exporters, which depend on American consumers to buy their products.

Japanese exporters were also hit by a strengthening yen, which erodes the value of their overseas earnings when converted back to the local currency. The yen was trading at 95.58 to the dollar in Asia, versus 97.98 yen a day earlier.

Sony Corp. slid 8.2 percent to 2010 yen. Another electronics maker, Sharp Corp., fell sharply on news it agreed to pay $120 million after pleading guilty to conspiring with two other companies to fix prices of LCD screens in the U.S. Its shares were down 6.2 percent to 683 yen.

South Korea's main index slid 6.5 percent to 1,051.38 as bellwether Samsung Electronics Co. sank 4.3 percent.

Oil prices continued their decline after the U.S. Energy Department said Wednesday it expects U.S. consumption of petroleum to next year drop more severely than any time since 1980.

Light, sweet crude for December delivery was down 81 cents to $55.35 a barrel, after falling as low as $55.03, in electronic trading on the New York Mercantile Exchange by midmorning in Singapore.

Wednesday, November 12, 2008

The Korean Won’s Current Woes

The Korean Won’s Current Woes
(Never made through the pipeline in April)

NINJA (no income and no job) mortgages and The Economist’s perpetual warnings regarding the US housing market bubble for the last five years are well served by an anonymous Korean investment manager who told me a few weeks ago, “We don’t need any more forecasts.” There is blood in the streets. The website suggested nearly 25% of US mortgages could turn into “jingle mail” where owners send the keys in for foreclosure because paying a mortgage on a house that is worth considerably less than its mortgaged amount is not a good investment. Some owners would prefer bankruptcy to pay rolling US banks’ risky and speculative losses on the housing market.

At the same time it is very difficult to separate Korean economics from the current US economic quagmire. Korea ’s exports depend on commodities pricing in oil, iron ore and steel and are more expensive to make and ship abroad because of what is happening to S.S. America at this time. Consumers appear to be tightening their belts. This means they are buying fewer new cars and household goods stamped Hyundai, Samsung or LG. Koreans are locally fixing prices on a number of staple items in a sort of national battening down of the hatches in the event of rising inflation or “stagflation” where the won valuation may continue to fall but prices keep rising.

In “The Lexus and the Olive Tree” Thomas Friedman warned that the future of economic crises in the globalized world is perpetually the fault of issuing bad loans to bad borrowers. Further he noted due to increased economic interconnectedness one should be prepared for more frequent global economic crises. Does that mean a bottom can be painted on current US dollar values which affect the Korean won so heavily? For some weeks now the US Federal Reserve has been attempting to do that. Is there a global recession at this time? We may observe the US dollar and Korean won exchange has displayed recessionary-type indicators lately for reasons relating to how interconnected the US economy is with Korea and most of the globe. Jay and Gar, Canadians living in Daegu wrote that they were quite worried about these current exchange rates and are there any recommendations to be made considering wiring money home? Well, unless you are paying off debts at home you might consider keeping it here in a term deposit hovering around 5% annually depending on your bank and also however long you plan to stay here. The more US dollars or foreign currency you purchase the lower the value the Korean won is pushed. Conversely the more Korean won you refuse to sell in exchange the higher the value the won may rise.

Even the longest recessionary cycles in recent times since 1945 have not exceeded 10 months and since 1919 (including The Great Depression) this average period increases to 14 months. My best buddy (a wild and crazy day trader) suggests that the current exchange rates may also be impacted by dividend season at Korean stock exchanges with foreign investors converting their gains to US dollars. Thus some of the current rates may be part of a periodic annual event at this time of year which coincides with the US sub-prime correction. So depending on your time in country you might like to locally invest in the interest of waiting out the current exchange rates. However, if you have an investor’s mindset already, you might also paradoxically seek to purchase US dollars in the hopes that they may rise again sometime in the next year and a half. J.P. Morgan said, "Any man who is a bear on the future of this country will go broke." Buy low sell high? Have we reached the bottom yet? Let us hope this also applies to the Korean won’s current woes.

The Fly Fishing Day Trader

The Fly Fishing Day Trader

Mr. William McRoberts can often be found fishing the Namdaecheon River in Yang Yang, Gangwondo where he lives and teaches English at Kwandong University . For much of the rest of his leisure time McRoberts pursues another interest, the Korean stock market. This patient rural fishing gentleman is a day trader. So asking him to give pointers regarding entering the Korean stock for beginners was a natural choice. “First of all you have to be aware that there are risks involved in the market. Only invest money you can afford to lose” He recommends, “You can start with as little as 1.000.000 won. Simply visit a securities firm, with your passport, and open an account. They will give you (download to a memory stick) a program to trade from any computer. There are security features to prevent hacking.” Concerning the technology, “The Korean exchange is all electronic, meaning no humans are involved in the trade. You choose a price that you want to buy or sell at and wait. If you want the going price, you get the stock trade immediately.” Regarding current level of fluency in Korean he adds, “You don't have to know Korean to be successful. All stocks have numbered codes. You can review the Korean stock on Yahoo finance, by entering the code, say 004020 for Hyundai Steel, and add .ks to get 004020.ks and you can see charts, high lows and some other limited data. The program you trade with will have more data, but it's in Korean and you will have to dig around to find it.” If you seek a human face to go with your trades, McRoberts cautions, “If you want the agent with the securities firm he can recommend stocks and even buy them for you, you will have to pay a 3 or 4 % fee. I would avoid this. Make your own decisions. It's more fun.” On the topic of taxes and fees, McRoberts is calming, “There are taxes and fees that all securities firms charge, but they are peanuts. Buying or selling is 0.025 % or about 25.000 won on a 10.000.000 trade.” On choosing evaluation tools, “The best indicator for the beginner is the Price to Earnings ratio. This means the price of the stock, divided by the earnings over one year. Hyundai steel traders about 11 to one. So the stock is about 78,000 won per share so they had earnings last year of approximately 7000 won per share. The lower the P/E number the cheaper the stock is. A good starting point would be a stock or stocks under 12. And don't put all your eggs in one basket. Buy a range of companies you understand, or are interested in. Don't sell when others are panic selling. Hold on.” McRoberts remains a fisherman, “Many Koreans see the stock market as a tool for gambling, expecting a quick buck, and prices can swing significantly, but if you are patient, and choose good stocks with future earnings potential, you should make money, over the long term.” Doing your own research and learning as you go are key recommendations, “It pays to research where the sector and the economy is going. Trying to pick bottoms in the stock price is a fool’s game. Remember the stock price today usually reflects the conditions that it is trading in today. But, it is worth trying a little investing, even if it is an education. You can direct deposit money each month, and over time it builds up. You can trade as little as one share. So to sum up, opening an account is simple, you can trade on line, and fees are very cheap.” As with every successful fisherman, McRoberts concludes with a precious maxim, “Patience is the key. Look to the future and access what areas of the Korean economy should be prosperous. Choose a sound leader in the sector. Sell if the stock hits new highs at low trading volumes. Some say sell any stock once you lose 8 % , but that could be raised to 10 or 12 % because of the swings in prices here in Korea . Keep slowly rising stocks. Sell fast rising ones. Don't average down if the stock falls. Greed and fear drive market swings. Be ready to ride out the storms, and you should be fine. Good investing.” If you have further questions, Bill may be contacted at:

Canada Continues Pressing to Re-Open Korean Market to Canadian Beef Exporters

Canada Continues Pressing to Re-Open Korean Market to Canadian Beef Exporters

The Government of Canada is continuing to work hard to re-open the Korean market to our world-class Canadian beef. Based on science and international standards, the Canadian beef industry has a strong case and we are committed to regaining market access for Canadian exporters.

Commentary: The riot fires have barely cooled on the last big local emotional debacle which was President Lee's incubus, "The US Beef Riots of 2008." Is it really the optimum time to visit this issue locally in Korea? Wouldn't it be better to foist Canadian offshore university campuses here first?

"The quality and safety of Canadian beef is recognized around the world," said Canada's Agriculture Minister, Gerry Ritz. "We are committed to providing our exporters with every possible opportunity and we are working to resume trade to Korea as soon as possible."

Commentary: Was not the "Mad Cow" which spoiled USDA beef's positioning in Korea found to originate in Canada?

Canadian and Korean veterinary officials held technical negotiations November 3-4, 2008, aimed at moving toward an agreement on the import requirements for Canadian beef. Restoring market access will allow Korean consumers to access safe, high-quality Canadian beef and beef products at competitive prices.

Commentary: None of the major Korean retailers have taken on USDA beef for fear of store burnings and loss of local market image. Canadian beef would then be subject to USDA beef competition for back alley sales.

Korean officials will be visiting Canada later this month to conduct on-site visits to Canadian beef slaughter facilities to see first hand the effectiveness of Canada's food safety and animal health safeguards.

Commentary: I hope they are not directed to Maple Leaf plants.

Korea banned imports of Canadian beef in May 2003, after bovine spongiform encephalopathy (BSE) was discovered in a Canadian cow. Prior to that point, Korea represented the fourth-largest market for Canadian beef, with $50 million in annual sales.

Commentary: A case of a bad apple which spoils the export barrel.

In May 2007, the World Organisation for Animal Health (OIE) officially categorized Canada as a Controlled Risk country for BSE, meaning the standards implemented in Canada meet the requirements for safe trade in a broad range of commodities.

Commentary: It might be better to move forward with a comprehensive free trade agreement first allowing Canadians to concede that Koreans are not much interested in North American cars. It just does not appear an opportune time to be pushing Canadian meats on Koreans with protectionist tendancies in a bear market. Their national hanwoo cow sentiments do not rest deeply and any gaulings might raise their gall.

B.C. Exporters to China Say ‘Seller Beware’ (More than two bits)

B.C. Exporters to China Say ‘Seller Beware’(Vancouver Sun – Joanne Lee-Young)

Some Chinese banks cite typos to help clients avoid paying for deals

The deal was signed, the lumber was shipped and received, and the B.C. company had sent off all the usual trade documentation so that it could collect payment from a buyer in China. But the buyer's bank in China refused to release funds because of a single typo. Instead of specifying "anti-surfaced stain," the B.C. company submitted a corresponding page that mistakenly read "anti-surfac stain."

Commentary: This might explain why many companies are demanding cash in advance at this time.

In another case, a B.C. company listed its name, for example, as "ABC Limited" on one sheet, which didn't exactly match the "ABC Ltd." that the Chinese bank had on its copy. Again, no money. In yet another example, a Chinese bank declined to pay, citing that pages in a document were numbered incorrectly, as one page was unmarked.

Commentary: Documentary requirements are being closely monitored for exactly these reasons, typos, incorrect details, descriptions, spellings, etc.

It's no surprise that it is becoming harder to get the so-called "letters of credit" that companies in different countries use to trade with each other via international banks. Markets are tight everywhere.

Commentary: Typically confirmed and irrevocable letters of credit will not impede payments due to small clerical errors which may be easily corrected especially if the two banks are quite familiar and the buyers and sellers are regular customers.

But B.C. companies exporting to China should, in particular, be aware that some banks in China are taking it to another level, nitpicking through already signed-and-sealed contracts and citing minor typos, spelling and punctuation mistakes so that their clients can wriggle away without paying.

Commentary: There can be no loss on an irrevocable and confirmed letter of credit.

"We had a meeting last week and [several trade officers from various banks] shared the same experience – whether from Vancouver, Toronto, New York or Hong Kong – that the Chinese LCs [letters of credit] are beginning to take the worse practices of their past," said Alban Lo, a Vancouver-based trade finance officer. "They are recently re-practicing a bad habit of digging up frivolous discrepancies. By finding these, they have a good pretext not to pay."

Commentary: This is against international chamber of commerce practices.

Observers – the bankers and the B.C. exporters themselves – have some reasonable guesses about why this is happening. For one, the prices of many commodities that are traded from B.C. to China via letters of credit have plunged. "The prices have worked against the Chinese buyers. If they commit to the payment, they are inheriting a loss," said Lo. "If they [don't] pick up the goods and if they can get out of [a contract], they can save a ton of money." This would make the reneging a one-off, commercially-driven decision.

In a worse scenario, a deeper drop-off in demand for these goods could be at play. Indeed, the situation comes as lofty academics, online bloggers and ordinary factory owners and workers alike are all vying to share their two bits about a slowing Chinese economy. How severe a slump? Hard landing versus soft landing? Many views are chicken-and-egg, citing China's place as a reprocessor of the world's commodities, both importing and exporting in vast quantities.

Commentary: Two bits? Am I sharing just two bits? I thought I was sharing well over six figures of bits in actual and opportunities costs for education and more than a dozen years of international contracts experience? Lofty? I think I am down and dirty?

Lo emphasized that "we don't believe that this is the practice of the major banks in China, especially the ones from larger centres like Beijing and Shanghai. We suspect that it is happening out of smaller pockets of China, where banks have more allegiance to their customer than to a head office."

Commentary: The Golden Rule needs to be applied. Do not accept letters of credit from banks of unknown or questionable reputation or a history of such practices. As well as not accepting credit orders from unknown buyers.

Whatever the case, B.C. exporters are also being pressured to make amendments to existing letters of credit. These include extending expiry dates, reducing order sizes and deferring delivery dates.

Commentary: These are reasonable requests and are permissable if in agreement between the buyers and sellers and represent further amendments to agreements on general terms and conditions in the original contract.

Even if they are eager to fire up stalled trade, local companies should not rush out these amendments as they might have before. There are some basic ways to take heed, according to Gary Kwan, a Vancouver-based vice-president at CTC Bank of Canada.

Commentary: Amendments are made on mutual agreement only and the trade relationship is based on mutual agreement.

Get letters of credit from reputable banks: "You are now relying on them to get paid. In China, there are a few banks that are well-established and widely accepted. If you go through a smaller one, insist that a bigger bank confirm the LC," said Kwan.

Commentary: There is no new development in this as this has always been the case.

Do everything you can to make sure documents are completely in order – the simpler, the better. "From the buyer's position, the tougher the conditions, the stronger their position," said Kwan. "On the other hand, for the seller, the more straightforward, the more favourable."Exporters are already getting the message.

Commentary: These have always been the principles of good international contracts as one should never sign anything that is not mutually understood or agreed to.

"You always have to be perfect with LCs in order to be paid. But what you have right now is that you have to be more than perfect because if there is a way for the customer to say, 'I don't want to pick up these documents,' it could be as minor as centre spelled as center, e-r not r-e," said Ken Grenier, co-owner of New Westminster North Rim Pulp and Paper, a year-old business that trades pulp.

Commentary: In that case find new customers.

Tracey Orr, who heads a Vancouver-based trade finance department at a major bank, put it this way: "What is old is new again. Letters of credit have officially been around for 70 years, with a uniform rulebook that is published out of Paris by the International Chamber of Commerce. There are revisions every 10 years, and it was last revised in July 2007.

"This cleared up a lot of the frivolous discrepancies, and we haven't seen many issues under these revised rules. Now [with tightened credit], what we are seeing is that you have got to pay attention to the rule book. Common sense. Dot your i's. Cross your t's. It doesn't matter what country you are in in the world, we are back to basics of international trade finance."

Commentary: Spelling counts!

Tuesday, November 11, 2008

Seoul struggles to silence crisis talk

The Times
November 11, 2008

Seoul struggles to silence crisis talk
Leo Lewis in Seoul

In a desperate attempt to shore up public confidence in its failing economy, the South Korean Government has moved to a “wartime” footing last seen in the days of the Asian financial crisis of 1997.

Commentary: As I remember it President Kim Young Sam overwhelmingly blamed ajoshis and adjummas for the crisis, taking too many holidays abroad and sending their children to too many foreign schools. Korean banks were noticeably absent from his trial without jury attributions.

As economists at the LG Economic Research Institute in Seoul told local media that the country was vulnerable to economy-led trauma, adding that a significant drop in GDP growth would “invite a surge in suicides and divorces”, the Government tried to reassure the public that South Korea's banks and large companies were in a much better state than they were a decade ago, backed by a prodigious stash of foreign reserves.

Commentary: We can only hope that most of those suicides kill themselves first? That prodigious stash is dwindling by the day though luckily not at GM's pressure bleed rates.

Public recollections of the Asian slump of a decade ago are still raw and Koreans are jittery at any sign of history repeating itself, reopening the country's deepest wound.

Commentary: Korea's deepest wound: to be found in debt and beyond its own national control.

President Lee reiterated the claim: “Right now,” he said, “the situation is fundamentally different ... and I can tell you for a fact: Korea will not have another financial crisis.”

Commentary: What kind of crisis is Korea having at this time?

Yet the Government's efforts may be overwhelmed by events: the country's banking system is beginning to look increasingly fragile, its credit bubble is at risk of deflating uncomfortably fast, the reserves are shrinking quickly and economists have started to downgrade South Korea's growth prospects.

Commentary: In times of downgrading of "the golden straight-jacket" promises mean nothing and only remedial actions which lead to foreign investor confidence are required. Now what are the best policies to put in place? Or does Korea have a crisis of reputation to deal with?

Seoul is also faced with challenges beyond its control: consumers in the United States are buying fewer electronics and cars; and the global shipbuilding industry, in which South Korea excels, is at risk from order cancellations as shipping rates plunge.

Commentary: Is it realistic to blame foreign customers in the USA for Korea's banking and credit bubble woes when in fact, the reason they are incapable of buying Korean products at this time is because they are: over-leveraged, under-capitalized, asset-poor, in bankruptcy and possibly unemployed all virtually at the same time?

Analysts at UBS believe that growth in South Korea will slow to 1.1 per cent in 2009, which would mark only the third time since the nation began to industrialise in the 1950s that its growth rate has sunk below 3 per cent.

Commentary: How reliable are UBS reports at this time? "The U.S. tax investigation risks compounding damage to UBS's reputation at a time it has been forced to make bigger writedowns than any other European bank in the credit crisis." Indictments possible in UBS inquiry: report

Added to the Government's headache is the very high level of private sector debt, which hit 180 per cent of GDP in the second quarter of this year and is higher than in America. That debt, analysts say, is going to start to unwind soon because of slowing employment and wage growth. Capital adequacy ratios at Korea's largest banks are also under closer scrutiny as they dwindle towards recommended minimum levels.

Commentary: President Roh appears to have perhaps spent more government money than nearly all previous heads of state combined?

Jae Ha Park, of the Korea Institute of Finance, argued that at the heart of the psychological battle were South Korea's large foreign reserves, which stand at $212 billion (£135.8 billion). That is $27 billion lower than they were a month ago, but still among the largest in the world. He said that they were a carefully positioned psychological tool to persuade the public that the country would not run out of dollars again.

Commentary: Why did the central bank wait over a year to adjust interest rates? Why has the monetary policy appeared piecemeal? What rates of repurchase of those US dollars have been represented by Korean banks attempting to shore up their own local reserves while depressing the won further every time the central bank releases a palette?

When the Asian financial crisis broke, ordinary Koreans could not understand how their country, which appeared to be highly prosperous, could suddenly run out of foreign currency. In astonishing scenes, Koreans rallied round, selling their gold and jewellery to help with the national drive to raise dollars. When the IMF stepped in to rescue the situation, it dealt a massive blow to national pride.

Commentary: How much of Korea's IMF-led reforms policy was lip-service to the debt and how much of Korea's national pride over IMF dictates affect Koreans interpretation of contract consideration? How many Korean companies have fully transparent accounting procedures? Korea's latest credit rating downgrade should have been forseen and is dependent on foreign investor confidence. The FDI flight has been/had been taking place a long time prior to the US mortgage crisis. What should be done, who should come forward with transparent business practices and how should leaders ameliorate Korea's seeming toxicity to the global financial world? Are former Enron executives roaming around on presidential pardons?

In a severe knock yesterday to the Government's efforts to talk-up the country's underlying financial health, Fitch, the ratings agency, downgraded its outlook for South Korea from “stable” to “negative”.

Commentary: Talk is cheap. Let's see financial reforms that separate the wheat from the chafe. Let's see Korea's financial and leadership really walk the global walk which attracts and increases foreign investment and reassures and calms said investors. Would this be the walk?

DHL to cut 9,500 jobs and close US service centers

DHL to cut 9,500 jobs and close US service centers
Monday November 10, 2:27 pm ET
By Harry R. Weber and Samantha Bomkamp, AP Business Writers
DHL to cut 9,500 jobs and close US service centers, Deutsche Post announces

ATLANTA (AP) -- In a move that could greatly scale back a possible venture between UPS and Deutsche Post's DHL, the German company said Monday it will significantly reduce its air and ground operations in the U.S. and cut 9,500 jobs within the country.

The DHL-UPS deal was expected to last up to 10 years and infuse Atlanta-based UPS with up to $1 billion in annual revenue, if completed as first proposed in May.

UPS, the world's largest shipping carrier, has said the contract with DHL, which it has been working to finalize, would mostly involve the transport of DHL packages between airports in North America -- not the pickup or delivery of DHL packages to customers.

If DHL made significant cuts to its ground operations in the U.S., it wouldn't necessarily affect UPS and DHL reaching a deal since their talks have solely involved air delivery of packages, not ground delivery. But Deutsche Post's announcement Monday went well beyond the elimination of ground products within the U.S. Deutsche Post said it will discontinue U.S. domestic-only air and ground products on Jan. 30 to focus entirely on its international offering.

Deutsche Post, which cited heavy losses and fierce competition for its decision to curtail U.S. operations, noted it is not pulling out of the market entirely. It said its international shipping services to and from the U.S. would continue.

DHL competes with rivals UPS and Memphis, Tenn.-based FedEx Corp.

UPS spokesman Norman Black said his company would continue to work on an air-haul vendor contract with DHL. But, he added, "Today's announcement by DHL certainly could affect the size and scope of that contract. We'll go back into talks and see what develops."

Black cited the part of the Deutsche Post announcement in which it said it plans to stop offering air service between U.S. cities.

"By stopping that service, the only thing that's left is moving international packages once they get to the U.S. border," Black said. "That's a dramatically lower amount of volume than what they were originally talking to us about."

Currently, the company's total air volume for shipments from points between U.S. and international destinations and between points within the U.S. is about 1.2 million shipments a day. Deutsche Post said that figure will drop to about 100,000 shipments a day after the changes go through. The air volume figures do not include packages that do not start or end in the U.S.

Avondale Partners analyst Donald Broughton noted that while DHL's announcement does not directly kill the deal with UPS, he thinks termination will be an end result.

"I think a lot of observers, myself included, knew the largest value of that contract (between DHL and UPS) was going to be on the first day, and it was going to dwindle very quickly thereafter," Broughton said. "This just accelerates that process."

Edward Jones analyst Dan Ortwerth said Deutsche Post's decision changes the scope of a potential DHL-UPS deal, but doesn't necessarily kill it.

"I don't see any motivation for UPS to outright walk away," Ortwerth said. "UPS is in the stronger position, and I'm sure at the bargaining table they will protect their own interests plenty well."

Broughton said that while both UPS and FedEx stand to gain as DHL pulls back its U.S. service offering, FedEx will likely have the upper hand in gaining a broader share of the market in both domestic ground and air express shipments.

The analyst notes that FedEx has a ground network roughly one-third the size of UPS, which will allow it to grow business incrementally compared to its chief rival if both companies share the new business equally.

And FedEx's extensive air network will allow it to more easily expand and take more business, he said.

DHL's air and ground operations produced $3.4 billion in revenue last year.

"This a nice piece of the market for UPS and FedEx to play jump ball with," he said. "Overall this environment is very challenging, and this has been a positive in a sea of negative."

But although there are major near-term advantages, Broughton said the biggest benefits might be seen in the long run.

"The real upside might be two, three or four years down the road, when the economy is feeling better and FedEx and UPS are able to raise prices, because they won't have another competitor nipping at their heels," he said.

DHL's current vendors for air shipments within the U.S., ABX Air and ASTAR Air Cargo, have been opposed to the DHL-UPS deal, saying it would cost thousands of jobs if it went through. Now, given the extent of Deutsche Post's announcement, many jobs could be lost at the two companies even if the DHL-UPS deal isn't completed.

ABX spokeswoman Beth Huber said the decision will affect ABX' work force and operations. Just how much of an impact has yet to be determined, she said. ABX has about 7,000 employees.

A woman who answered the phone at ASTAR's offices declined to comment or take a message for a spokesperson, referring calls to DHL instead.

FedEx said in a statement that it welcomes the opportunity to pick up some of the U.S. business that DHL is exiting. "Global shippers have told us they are looking for unparalleled global reach, and FedEx is the global leader in express transportation," FedEx said. Black said UPS over the last several months has won the business of a number of former DHL customers. He said UPS expects to continue to be able to do that in the future.

Deutsche Post, based in Bonn, Germany, said the new round of job cuts are on top of another 5,400 job cuts it already announced.

The DHL Express unit currently employs some 18,000 workers. Deutsche Post said its other operations in the U.S., including freight and global mail and other logistics, won't be affected by its decision to close all of its U.S. ground hubs and reduce the number of stations from 412 to 103 across the U.S. The company said all international shipments into the U.S. will still be delivered, while 99 percent of the outbound shipments will be picked up.

The decision was announced as Deutsche Post said its third-quarter net profit more than doubled to 805 million euros ($1 billion) compared with 350 million euros a year earlier. Sales rose 4.1 percent to nearly 14 billion euros ($18 billion).

Deutsche Post investors cheered the decision, sending the company's shares up 7 percent to 10 euros ($12.90) in Frankfurt trading. In afternoon U.S. trading, UPS shares rose $1.95, or 3.8 percent, to $53.87, while FedEx shares rose $1.55, or 2.4 percent, to $66.13.

Commentary: I am told this kind of market withdrawal, which looks like a house-cat drawing its claws around its bed due to sudden drafts will be much more common in the months to come.

Fitch lowers credit outlook on emerging economies

Fitch lowers credit outlook on emerging economies
Monday November 10, 6:50 am ET
By Kelly Olsen, AP Business Writer
Fitch Ratings lowers credit outlooks on 6 emerging economies amid financial crunch

SEOUL, South Korea (AP) -- Fitch Ratings on Monday lowered the sovereign credit rating outlooks for six emerging market economies to reflect higher risks to creditworthiness stemming from the global financial crisis and economic slowdown.

The outlooks on the long-term foreign currency ratings for South Korea, Mexico, Russia and South Africa, were revised down to "negative" from "stable," Fitch, one of the three major international credit ratings agencies, said in a release. A negative outlook means there is a greater chance of the actual credit rating being downgraded.

Outlooks on Chile and Malaysia, meanwhile, were lowered to "stable" from "positive," the agency said.

South Korea's A+ rating is four notches below Fitch's highest of AAA and six notches above "speculative" grade, generally regarded as "junk."

Russia, Mexico and South Africa are all rated BBB+, three levels above "speculative." Chile is at A, and Malaysia is at A-.

"The profound shift in the global economic and financial outlook pose significant real economy and policy challenges for emerging markets," David Riley, head of Fitch's Global Sovereign Ratings Group, said in a statement.

Riley said that policymakers in emerging economies have less room for mistakes than their counterparts in advanced countries, though are in a better position to deal with the current challenges than at any time in the past.

"Nonetheless, the risks of economic and financial stress that could undermine sovereign creditworthiness have risen and that is reflected in the prospective ratings actions taken today," he said.

Fitch said the action followed a global review of the ratings of 17 major emerging market economies carried out "in response to the profound deterioration in the global economic and financial outlook."

Bulgaria, Kazakhstan, Hungary and Romania had their credit ratings downgraded by Fitch.

Brazil, China, India, Peru, Poland, Taiwan and Thailand had their ratings affirmed.

The agency said that contagion from the global financial crisis in advanced economies "triggered extreme volatility in emerging market asset prices" and caused "liquidity strains."

Foreign investors have fled emerging markets in droves during the crisis, cashing out of stock markets and sending funds back to their home economies and currencies.

Fitch praised the response to the crisis by international financial authorities including the U.S. Federal Reserve, the European Central Bank, the European Union and the International Monetary Fund.

"In large part due to the impressive speed and scale of the response ... the risk that the financial market crisis would spiral into a broader economic and sovereign credit crisis has significantly eased," Fitch said.

In South Korea's case, Fitch expressed concerns that government support for the country's banks amid the credit crisis could undermine its external credit and foreign exchange reserve position.

South Korean banks and companies have struggled to secure U.S. dollars needed to meet foreign currency debt obligations as international lending has dried up amid the global credit crunch.

For Malaysia, Fitch said it considered the likely impact on the country's balance of payments from lower oil and other commodity prices along with weaker demand for electronics exports.

"Malaysia is one of Asia's more open economies and the region's only significant net oil exporter," Fitch said.

Commentary: This is Fitch's vote of non-confidence in the Korean Government's current strategies and reform plans which appear too little too late as the fox has already left the chicken coop? On the brighter side there is a long way to go to junk status.

Saturday, November 08, 2008

Key Export Items to See Sales Drop

NOVEMBER 08, 2008 09:16

Key Export Items to See Sales Drop
Dong A Ilbo

As the global financial crisis has spread to the real economy, the biggest challenge facing Korea is an export slowdown.

Back in 1998, when Korea faced a severe currency crisis, the country overcame its difficulties since most economies save a few Asian nations enjoyed an economic boom. Korea, however, cannot expect exports to help it out of economic difficulty this time, as developing markets such as China and India as well as advanced economies are slowing down.

Commentary: China and India have proven real growth sectors for Korean products in the last decade and recent 40% drops in BRIC funds values indicates precipitous plunge in Indian and Chinese purchases may soon follow.

Undeniably, all industries will suffer from falling exports. Most of all, industries that are heavily dependent on exports to developed economies are likely to see a significant setback since developed economies are being affected by a real economy slowdown.

Commentary: It stands to reason that China and India will provide greater net downturns in export volumes.

The Knowledge Economy Ministry said Korea’s exports to Europe last month declined 8.2 percent from the previous year, in stark contrast to its year-on-year growth rate of 23.7 percent in October last year. Similarly, the year-on-year growth rate in trade with other economies including that of the United States (32.6 percent to 10.8 percent), and Japan (nine percent to 5.5 percent) has also rapidly decreased.

Korea posted a double-digit export growth rate last month thanks to the weakening won and surging demand in developing economies such as the Middle East and Latin America. Export growth, however, is not expected to surpass 10 percent next year.

Commentary: Some expect it to fall to about 1% growth next year.

Samsung Economic Research Institute said exports will grow 8.3 percent and LG Economic Research Institute predicted 8.9 percent. Given depressed economic sentiment in developed economies, however, the forecasts could see further downward adjustment.

Commentary: The sooner the better as research indicates positive thinking is more well engendered under forecast terms of market realism.

The durable goods industry will be the first to suffer. When economic conditions worsen, consumption of durable goods such as cars and electronics goods is the first to suffer. People tend to use durable goods for a longer period and hesitate to buy new ones in times of difficulty.

Commentary: Therefore former employees of Big Three car makers might best be retrained as auto repair specialists?

LG said American consumption of cars, electronics goods and audiovisual devices decreased three times faster than that of other goods when the United States suffered an oil shock in the late 1970s.

Yoon Se-uk, head of research at Meritz Securities, said, “As the car, IT and shipbuilding industries are most directly affected by the economic slowdown in developed economies, they will have more difficulty than other sectors.” The European market has seen falling sales.

Commentary: Lloyds claims shipping and ship production is floored with over five times required capacity in production orders for the next five years

Korea’s electronics industry, whose sales surged this year due to the weakening won and the Beijing Olympics, is unlikely to enjoy similar success next year.

The downturn in the car and shipbuilding sectors has also resulted in falling demand for steel. Steel production volume has increased but dropping demand has resulted in lower prices of most steel products.

Commnentary: Korean steel fabricators probably share similar concerns as shown in the graph below?

(The Fabricator)

The shipbuilding industry is also suffering. As the financial crisis has spread, ship owners have faced financing difficulties. Worse, the sector, which had enjoyed surging demand in recent years, will experience a sharp decrease in new orders soon. Most new orders, however, will go to Korean shipbuilders when economic difficulties deepen.

Commentary: Safe bet to say virtually any Korean comapny accustomed to easy credit terms in the last decade since "The IMF Crisis" is feeling financing difficulties?

IT sectors such as semiconductors and wireless communications devices will also see a sharp downturn. Semiconductor exports have fallen for four consecutive months due to falling prices resulting from oversupply, and are expected to face a prolonged slowdown. Exactly when semiconductor prices will rise again is unknown.

Commentary: Over-reliance on these two industries has been often commented upon and is the sticking point of moving Korea's industrial export dominated economic model towards an innovations led economy. Any suggestions and /or plans for this?

Demand for semiconductors is likely to fall significantly. Ju Dae-yeong of the Korea Institute for Industrial Economics and Trade said, “Since semiconductors are a kind of intermediate goods used to make electronics goods, personal computers and mobile phones, demand for semiconductors will fall when demand for consumer goods decreases.”

Exports of wireless communication devices such as mobile phones will slightly decrease. Industry experts say they will also be affected by economic conditions but demand for those devices will not fall significantly since Korea’s mobile device manufacturers have diversified their export markets. They have exported high-end goods to advanced economies, mid- and low-priced devices to developing economies, and parts of wireless communications devices to China.

Commentary: There still appears to be the expectation that developed economies are the root causes and singular affected parties at this time. Many opinions suggest that the global fallout in world trade will be significant reduction in developing economies trade.

The petrochemical industry is sensitive to economic conditions. Korea mostly produces petrochemical goods in China and exports to developed economies. Given that, China’s economic slowdown will inevitably deal a serious blow to Korean petrochemical companies. Samsung Economic Research Institute director Kim Jae-yoon said, “Since many Korean companies first export their goods to China and later to the U.S., most Korean industries will be influenced by the economic slowdown in advanced economies.”

Commentary: Again this admission is a good one and how large is the percentage of those goods? I would reckon up to 75% of Korean trans-shipments to China are destined for developed markets.

Korea’s textile exporters, however, could see a surge in profits this year given the weak won. Textile exports are likely to fall next year, however, due to weakening demand. Korea’s textile and clothing producers have avoided the negative influence of the economic slowdown since they have mostly sold low-priced goods to large-scale discount stores, but could suffer from falling demand when the global economy worsens.

Commentary: These textile producers are also facing stiffer competition from nations like India, China and Sri Lanka. It would be over-optimistic to expect Korean textiles to out-price these other nations.

13 Foreign Airlines Pull Out of Korea


13 Foreign Airlines Pull Out of Korea

By Kim Hyun-cheol
Staff Reporter

The cold spell hitting the global economy is also bringing chills to the airline industry, as with financial pressure intensifying, foreign carriers have begun suspending flights to Korea, government officials said Friday.

Since the last week of October, when winter schedules began for most airlines, a total of 13 foreign companies have not requested the renewal of services on their routes, said an official of the Ministry of Land, Transport and Maritime Affairs (MLTMA). Seven, however, have opened new routes.

The official said both cargo and passenger volume from other countries started to lag behind that of the previous year from June.

Atlas Air, a leading U.S. cargo carrier, and American carrier Kalitta Air, no longer offer services, while two Russian airlines, Russian Sky and Khabarovsk Airlines, have pulled their Korean routes. Three Taiwanese-based companies, including the bankrupt Far Eastern Air Transport, are also no longer servicing Korean routes. Mandarin Airlines of Taiwan, however, is planning to resume flights next month.

On the positive side, Japanese and Chinese airlines are augmenting flights for tourists who are taking advantage of the weaker won.

Chinese-based Great Wall Airlines and China Cargo Airlines started services between the two countries.

Japan Airlines arranged 443 flights in total for its winter timetable, up 21 from last year. JP Express, a Tokyo-based cargo airline, also launched new flights starting this month.

The load factor (passenger occupancy rates) from Japan has gone up 10 percent since last month, as the Japanese yen has jumped nearly 40 percent against the won. The number of Japanese visitors surpassed 200,000 in September, up 4.8 percent year-on-year.

With many carriers rearranging their routes because of falling demand for cargo, a rebound in inbound flights is not likely to happen soon, industry watchers said.

Meanwhile, the ministry was cautious to link the downturn trend directly to the current economic slump.

``Some flight withdrawals are normal for this time of year, a relatively slack season for tourism,'' said Park Jeong-gon, an assistant director of international air transport at the MLTMA.

Currently, 61 overseas carriers from 27 countries are using Korean airports.

Commentary: If Chinese and Japanese tourists can be drawn as export income due to a weaker won than the hypothetical argument may also be made that a weak won is good for Korean exports overall. For regional buyers looking for value priced goods demand might increase enough to meet Government export goals for 2009?

Friday, November 07, 2008

Shipments of food, energy are slowing

Shipments of food, energy are slowing

NEW YORK — The growing financial crisis is constraining world trade with a jumbled mess of frozen credit that could mean shortages of food and energy supplies for some countries.

Shippers of dry bulk goods such as grain and coal worry that importers won’t be able to pay for the goods they receive. And while some anxious exporters hold on to their goods, rates to ship those goods have plummeted to 10-year lows. Some ship owners are even laying up their ships rather than operate at such low rates.

Jefferies & Co. analyst Douglas Mavrinac said while credit markets in general have stabilized somewhat in recent weeks, credit across the shipping industry still remains extremely tight. Some companies that buy goods transported by dry bulk ships — including power plants, steel producers and food makers — are not able to secure letters of credit to facilitate shipments of coal, iron ore and grain they need.

Mavrinac said most markets around the world will work through stockpiles of commodities on hand, including coal and grain. But he said food and energy shortages could be a problem next year, especially in developing countries, if lending does not ramp up and shipping activity continues to stagnate.

“It will take a few months, it’s definitely the worst-case scenario.” Mavrinac said. “Right now there are plenty of ships, but no cargoes.”

Rates for the biggest ships on the seas have plunged to an average of just $5,611 per day, compared with $166,377 a year ago. Some companies, however, have secured charter deals with customers that locked in higher rates.

“That doesn’t imply that global demand is slowing,” Mavrinac said. “It implies that global trade is stalling — ships are idling.”

Bill Gary, president of Oklahoma City-based Commodity Information Systems, noted that with the U.S. harvest season under way, supplies are surging and crops, such as grain, might sit in limbo if tight credit markets continue to prevent the free flow of exports.

As prices for their crops fall, he explained, farmers hold on to more of their crops as they wait for better prices as inventories decline.

Midwestern farmers appear to be confident they can get higher prices if they just keep their grain off the market long enough, said Rod Weinzierl, executive director of the Illinois Corn Growers Association. Farmers paid historically high prices for fertilizer and fuel to grow this year’s crop, and are not eager to sell at a loss.

Weinzierl, who farms 500 acres of corn and soybeans near Stanford, Ill., said local grain elevators are not full yet, so farmers are using up the storage capacity to wait out low prices.

“Right now, there is nothing really forcing farmers to sell, and at these prices they’re not going to,” he said. “The price is actually below production costs.”

Gary said even though the credit markets have eased up a bit, commodity shipments have slowed further as freight rates for drybulk ships continue to plunge.

“Things have gotten worse over the past couple of weeks,” he said. “Last week was probably the worst that we’ve seen.”

Gary noted that shipments of corn, grain and wheat have stalled as receivers of U.S. commodities still don’t trust letters of credit from many banks, if they can be secured at all.

U.S. corn “commitments,” which include corn already shipped and outstanding sales, have tumbled 40 percent from a year ago. Wheat commitments are down 29 percent.

If the credit markets do not right themselves soon, he said, grain exports could dwindle to some smaller Asian countries. Exports to Europe might also weaken if credit does not begin to flow more easily in the next month, he said.

But Gary Martin, president of the North American Grain Export Association, says the possibility of a global food shortage is overblown. The trade group represents public and private grain exporters, including Cargill Inc. and Archer Daniels Midland Co., as well as some farmer-owned cooperatives. A spokesman for ADM declined to comment, and representatives for Cargill deferred comment to NAGEA.

Martin said that while supplies are mounting in the United States as worldwide demand slows, any shipping delays are likely to be on an individual basis, and that credit issues are not a widespread problem for food transfers around the globe.

He noted that the United States has systems in place to prevent major disruptions in the supply chain — such as the USDA’s GSM-102 program, which guarantees credit for commercial financing of U.S. agricultural exports.

Commentary: Friends and students have been mentioning this new development for a few weeks now and this is the first article I have actually read in print. As a lot of my teaching hours are spent trying to explain international trade correspondance and the credit financing process it is a worrying decline in credit worthiness which could really impact Korean purchases abroad of raw materials and commodities essential to their export growth targets. It causes me to wonder if anyone beyond international trade students really understands the problem of stalled global trade due to banks suddenly scrutinizing every credit transaction with fine-toothed combs beyond the process itself to actual damage of business trading relationships. Such positional swings in terms of commodities; first the speculators starve the poor due to their profits and then the exporters starve their customers due to sudden fears over global credit worthiness when the prices tumble.